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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 ..... tion entry in the form of bogus long term capital gain through share transaction of a penny stock company namely 'Blue Print Securities Limited' during the assessment year under consideration. The assessment of the assessee was, therefore, reopened and assessment proceedings u/s 147 r.w.s 144B of the Act were completed on 30.03.2022 determining total income at Rs. 2,55,970/-. Thereafter, the ld. PCIT found some discrepancies in the assessment order and he accordingly exercised his revision jurisdiction u/s 263 of the Act and observed that the assessment order passed u/s u/s 147 r.w.s 144B dated 30.03.2022 was erroneous and prejudicial to the interest of revenue. The ld. Pr. CIT, accordingly, issued show-cause notice to the assessee on 15.02.2023 as to why the assessment order be not revised, the same being erroneous and prejudicial to the interest of revenue. The relevant part of show-cause notice is reproduced as under: "4.1. The assessment record in the case of M/s. Ramotar Choudhari HUF(PAN-AANHR9093K) for A. Y. 2013-14 was called for and examined by the undersigned. In the instant case assessment order was passed u/s 147 r.w.s. 144B on 30/03/2022 determining total income of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT has also been reproduced in the impugned order of the Pr. CIT in para 5 running from page 3 to 7. 2.2 However, the ld. Pr. CIT did not get satisfied with the submissions of the assessee observing that from the record and reply of the assessee, it was found that the evidences gathered against the assessee including the statement of entry operators and other relevant materials to prove M/s Blueprint Securities Ltd. was penny stock company, were not properly confronted by the Assessing Officer to the assessee and therefore, the assessment order was erroneous and prejudicial to the interest of revenue, the same being passed without making enquiry and verifications which should have been made. The operating part of the order of the ld. Pr. CIT is reproduced as under: "6. The submission/reply of the assessee dated 14.10.2023 was considered. The assessee has also filed reply submitted to the A.O. during the assessment proceedings with respect to show cause notice dated 22.03.2022. There is no dispute on the fact that the assessee has claimed exemption on LTCG on sale of shares of the listed company M/s Blue Print Securities Limited. The assessee claims that sale was made throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereafter referred certain case laws and held that the reassessment order passed by the Assessing Officer u/s 147 of the Act was erroneous and prejudicial to the interest of revenue and therefore set aside the assessment order dated 30.03.2022 with a direction to the Assessing Officer to pass a fresh assessment order. 3. We have heard the rival contentions and gone through the record. At the outset, the ld. Counsel for the assessee has invited our attention to the reasons recorded u/s 148 of the Act for reopening of the assessment, wherein, the reasons for the reopening of the assessment have been mentioned that "...as per the information furnished in the report, the assessee had transacted in shares of 'BLUE PRINT SECURITIES LIMITED' during F.Y 2012-13 and is one of the said beneficiaries. The information furnished by the Directorate of investigation is showing transaction in shares of 'BLUE PRINT SECURITIES LIMITED' at a trade value of Rs. 12,30,000/- by the assessee and the said information is also suggesting accommodation entry in the guise of bogus LTCG by the assessee on such transactions..." The ld. Counsel in this respect has submitted that the reopening of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has set aside the reassessment order passed u/s 147 of the Act solely on the ground that the information was received from Investigation Wing that the assessee has received an accommodation entry from Blue Print Securities Ltd. It is pertinent to mention here that the reopening of the assessment was also done on the basis of same information. However, after examining and scrutinizing the details and evidences furnished by the assessee to prove the genuineness of the transaction, the Assessing Officer accepted the said transaction and did not make any addition in this respect. Under the above facts and circumstances, the legal question raised by the ld. counsel is as to whether ld. Pr. CIT was justified in setting aside the assessment order citing the same reason for which the assessment was reopened, even without examination and pointing out any defect, error or infirmity in the evidences furnished by the assessee before the Assessing Officer and without making any further enquiries in this respect. At this stage, it will be relevant to reproduce the relevant provisions of section 263 of the Act as under: "Section 263(1) of the Income- Tax Act reads as under: (1) The Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of Revenue. We further note that the Ld. Pr. CIT did not raise any query as to what enquiries were made by the Assessing Officer before proceeding to pass the assessment order in question. The opinion of the Commissioner that the Assessing Officer had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. The reopening in this case was held on the basis of some information received from Investigation Wing, whereby, the Assessing Officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order. However, a perusal of the revision order passed by the ld. Pr. CIT shows that the ld. Pr. CIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr. CIT, in our view, was not justified in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law." 11.2. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: "10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suo-moto power is impermissible. It should not be presumed that initiation of power under suo-moto revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AO is erroneous as well as prejudicial to the interests of the Revenue. The concept of "prejudicial to the interests of the Revenue" has to be correctly and soundly understood. It precisely means an order which has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat High Court was seized with the following substantial question of law: "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 13. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: "63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: "We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said chit fund which was also an assessee." 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed." 13.1. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Relevant extract is reproduced below: "In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication conducted by the AO was not in accordance with the enquires or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant." 8. At this stage, the ld. counsel has placed reliance on the decision of the jurisdictional Calcutta High Court in the case of 'PCIT vs. Usha Polychem India (P) Ltd' reported in [2023] 149 taxmann.com 240 (Cal), wherein, the Hon'ble Calcutta High Court has held that where Principal Commissioner involved revision jurisdiction under section 263 in case of assessee on basis of an information received from Dy. Director (Investigation) regarding huge amount of unaccounted funds received in bank account of assessee, since a reassessment proceeding was already invoked and completed on basis of same information, impugned revision was unjustified. The relevant part of the order of the Hon'ble Calcutta High Court is reproduced as under: "4. The short issue which falls for consideration in the instant case is whether the assumption of jurisdiction by the Principal Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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