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TMI Blog2024 (6) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... eous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue because of the order of the ld. AO not made addition, cannot be treated as prejudicial to the interest of the Revenue. As pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law for which nothing has been placed on record by the PCIT that view of the ld. AO is totally incorrect. In this process even the AO has no power to review his own order. Ergo, despite our deep and careful consideration of the material on record and the findings recorded in the order under challenge, we do not find any incorrectness and incompleteness in the appreciation of facts made by the ld. AO. We do not agree on this aspect to this extent with Ld. Pr. CIT. Even before us the ld. DR did not placed on record any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led submissions made by the assessee in response to notice u/s. 263 and in passing the impugned order on assumptions, presumptions, conjectures and surmises which is bad in law. 4 3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing. 3. The fact as culled out from the records is that in this case the assessee has filed return of income on 26.10.2016 for the A.Y 2016-17 declaring total income at Rs. 16,40,790/- and the same was processed on 14.04.2017 u/s. 143(1) at the returned income. As per the record it is seen that the information and detailed report provided by the Directorate of Income tax (Inv), Mumbai. As per the information it has been found that the assessee has introduced his own unaccounted funds through the colour of bogus LTCG entry, by trading in penny scrip of M/s Goenka Business and Finance Limited Ejected Marketing Ltd. The assessee is one of the beneficiaries and has taken accommodation entry. Thus, the assessee has unaccounted income to the extent of Rs. 77,79,200/- in form of cash which he had advanced as cash which he had advanced as cash to obtain accommodation entries. Because of these reasons, after obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain made by the assessee. The AO simply accepted reply of the assessee and documents submitted by him without making any inquiry / Investigation / verification of the same. 6.4 Further, it is noticed that the AO issued a query letter dated 17.12.2021 in this case to the assessee as under Please refer to the scrutiny assessment proceedings u/s 143(3) / 147 of the Act in your case for the AY 2016-17. In this connection notice u/s 148 of the Act was issued on (31/3) / 2021 vide DIN notice No.ITBA/AST/S/148/2020-21/1032022048(1). Intimation you the reason of assessment. Thereafter. notice u/s 143(2) read with section 147 of the Act and was issued on (21/10) / 2021 requiring you to submit your reply on the date mentioned in the notice. But no response has been made till the due date in compliance of the said notice. Please note that this is a time baring case and limitation matters are involved. You are once again requested to strictly adhere the date and time mentioned in this notice In this connection of the above, you are requested to furnish the following information/document on the date fixed by virtue of this notice. With request to the capital gains during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of the revenue and hence liable for revision under section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has held as under- .... 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. 8 Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 23/03/2022 for AY 2016-17 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying the applicable sections of the Act The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation entry as detailed here under: S.No. Name of Scrip LTCG Transaction Amount 1. Appu Marketing Ltd./ Ejecta Marketing Ltd. (Script code-EML/538653/INE649L01013) 77,79,200/- 4. That the assessee filed his reply on 03.01.2022 is pursuance of notice u/s 142(1) dated 17.12.2021 wherein e submitted as under: That I have purchased 12500 equity shares of Rs. 10/- each of M/s Appu Marketing and Manufacturing Limited/ Ejecta Marketing Limited (Listed in Bombay Stock Exchange script code 538653) @ 10/- per share total amounting to Rs. 125000/- from M/s Pears Mercantile Private Limited (PAN AAFCP8292H) on 10.01.2014. That the 12500 equity shares of Rs. 10/- has been received in DP Account No. 1201770100000120 with M/s Hem Securities Ltd on 05.02.2014. That I have sold 11900 equity shares of Rs. 10/- through M/s Hem Securities Ltd member of Bombay Stock Exchange clearing member No. 248 PAN AABCH8005N as per details below:- Bill No. Date Amount No. of share B/NM/039/818 29.05.2015 Rs. 1467261.80 2200 B/NM/040/747 01.06.2015 Rs. 1469448.02 2200 B/NM/041/929 02.06.2015 Rs. 1202276.00 1800 B/NM/067/1006 08.07.2015 Rs. 1478233.76 2200 B/NM/179/1013 21.12.2015 Rs. 1265982.16 2000 B/NM/181/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the revenue. I, accordingly, propose to modify the order on the above issue under the power vested with me u/s 263 of the I.T. Act, 1961. 8. That it is trite that the exercise of power u/s. 263 of the Act is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue, if the Assessing Officer has taken a view which is not legally tenable. Per contra, if two views are available on a particular issue and the AO adopts one of such views, the case goes outside the purview of revisional power exercisable by the PCIT u/s. 263 of the Act. Proceedings u/s. 263 cannot be sustained where the ld. CIT holds a view which was different from that of the Assessing Officer. Section 263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of AO unless the decision of the AO is found to be erroneous. 9. The language used by the legislature in section 263 is to the effect that the CIT may interfere in revision, if he considers that the order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. It is quite clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. 13. We wish to refer and rely upon: Hon ble Rajasthan High Court in PCIT v. Manna Trust (2022) 1 TMI 693 has held: We are broadly in agreement with the view of the Tribunal. It is well settled through a series of judgments that power under Section 263 of the Act can be exercised only when twin conditions of the order of assessing officer being erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of the Commissioner under Section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal . Hon ble Calcutta High Court in PCIT v. Kaushalya Dealers (2023) 5 TMI 365 has held: Revision u/s 263 - loss of penny stock - as per CIT AO has not done proper verification - Scope of no enquiry - HELD THAT:- As notice u/s 142(1) was issued. In r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief. It is the submission that so far as the merit of the cases are concerned similar issue was tested by this Court in the case of Principal Commissioner of Income Tax Vs. Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] Though such may be the issue, as pointed out earlier the learned Tribunal had granted relief to the assessee on two grounds the first of which being that the exercise of power under Section 263 of the Act was not in accordance with law. As could be seen from the substantial questions of law suggested by the revenue, the revenue has not raised any question on the said finding of the Tribunal which goes to show that the revenue had reconciled with the reasoning given by the learned Tribunal in that record. Therefore, a piecemeal challenge to the order passed by the learned Tribunal on one of the grounds on which relief was granted to the assessee is not maintainable. In more or less identical circumstances in the case of Principal Commissioner of Income Tax, Durgapur Vs. M/s. Sinforte Pvt. Ltd. [2022 (1) TMI 1297 - CALCUTTA HIGH COURT] the court had dismissed the appeal filed by the revenue on the ground that the PCIT in order to exercise jurisdiction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons carried out by other parties by utilizing the PAN of the assessee, the AO is directed to carry out necessary verifications from such other parties and from BSE/NSE. Thus, the bench noted that on both the issue the ld. PCIT has not pointed that how the order is erroneous and prejudicial to the interest of the revenue. He merely aims to make inquiry as per his will and wishes which could have been done at the time of assessment proceeding as per the supervisor power vested and for that again and again same exercise cannot be done on the assessee. The law does not permit for change of opinion, when the ld. AO on both the issues raised the questions and considered the explanation of the assessee and assessment was completed. Therefore, we find force in the arguments of the assessee that on the same observation and issue the ld. PCIT cannot direct to make the enquiry what he deem fit. As decided in Aishwarya Rai Bachchan vs. PCIT [2022 (3) TMI 524 - ITAT MUMBAI] when the very basis of reasons recorded by the Id. AO was ultimately not added by the Id. AO in the re-assessment proceedings, then the primary reason to believe that income of the assessee had escaped assessment fails and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble ITAT Kolkata Bench in Mukesh Kumar Agarwalla v. PCIT (2023) 12 TMI 628 has held: Revision u/s 263 - CIT noticed that AO had not properly examined the issue of suspicious sale transaction in shares and exempt LTCG claimed by the assessee - whether the AO has carried out the required examination and verification of the transaction of sale of shares, yielding long term capital gain claimed as exempt which is one of the reasons for selection of the case of the assessee for scrutiny assessment? - HELD THAT:- From the factual matrix of the issue raised by the ld. PCIT, we find that he has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of the revenue, for passing the impugned order u/s 263 of the Act. We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issue raised through the show cause notice by the PCIT, supporting its contentions by corroborative documentary evidences. It is well settled law that for invoking the provisions of section 263 both the conditions that the order must be erroneous and prejudicial to the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings has taken one of the possible views while framing the assessment under the provisions of section 143(3) of the Act. It is the settled position of law that any plausible view taken by the AO during the assessment proceedings cannot render the assessment order as erroneous insofar judicial to the interest of revenue. In holding so we draw support and guidance from the judgement of Embassy Brindavan Developers [2022 (10) TMI 1120 - KARNATAKA HIGH COURT]. All the necessary documents in support of the transactions carried out by the assessee have been duly furnished by the assessee before the authorities below. Thus we are of the view that there is no infirmity in the assessment order requiring the revision under the provisions of section 263 - Decided in favour of assessee. Hon ble ITAT Delhi Bench in Pooja Mittal v. PCIT (2023) 6 TMI 836 has held: Revision u/s 263 - Bogus LTCG - CIT alleges failure of AO to investigate/verify details filed in respect of suspicious transactions on shares rendering the assessment so made to be erroneous in so far as it is prejudicial to the interest of the revenue - HELD THAT:- One cannot possibly say that the Assessing Officer had sleepwalke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Term Capital Gain from the position of the possibility of it being a sham transaction - HELD THAT:- On giving our thoughtful consideration to the claims and counter claims of the parties before us, we deem it appropriate to first cull out the facts necessary for adjudicating the issue before us namely; can the order passed by the PCIT u/s. 263 exercising the Revisionary Powers be said to be a valid order in the eyes of law on the basis of facts and evidences on record. In order to examine the said question, we need to set out the relevant and necessary facts on the basis of which the answer to the said question can be determined. The assessee in the facts of the present case has sold the shares of M/s. CCL International Ltd. which were acquired as a result of amalgamation of M/s. CCL International Ltd. with M/s. AAR Infrastructure wherein the assessee had originally invested a certain amount. It is an accepted fact that the Amalgamation Scheme under the aegis of the Hon'ble Delhi High Court has attained finality. The number of shares received by the assessee as a result of the amalgamation is not the issue for determination in the present proceedings. AO considering the infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trospected upon and addressed by the tax authorities. Permitting such criminal acts by carelessly accepting the statements/surrenders made by unscrupulous brokers needs to be addressed consciously especially when applied to the clients of such brokers who may have trusted the financial acumen of these brokers. These innocent trusting lambs should not be carelessly allowed to be thrown at the wolves by the manipulative brokers. These surrender statements should be viewed with due care and caution. It is necessary for the tax authorities to examine whether the traded company has actually been barred from the Stock Exchange or was still continuing on the Stock Exchange. For the sake of removing doubts, it is being clarified that the observations are made to the transaction of buy/sale through the D-Mat account on the Stock Exchange in listed companies. On a careful consideration of the entire facts, circumstances and position of law as discussed in detail in the earlier part of this order and considering the evidences which were filed before the AO and the ld. PCIT and even further elaborated before us by both the parties, we find on facts that the Revisionary order in the peculiar fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted the all the relevant details that has been called for by the NeAC and based on the submission and after considering the details placed on the record (APB-17-32). In the assessment order the ld. NeAC has discussed the reply of the and upon verification of the details and facts of the case ld. AO / NeAC completed the assessment at the returned income. The ld. PCIT at para 7 trying to impose his view on the matter and intending that the ld. AO should have applied mind as per will and wishes of the PCIT but at the same time PCIT has not pinpointed any error or prejudice in the view of the ld. AO which is taken after calling for the information and verification of the same the assessment is completed. Therefore, invoking of the provision of section 263 is beyond the scope of the provision of section 263 and therefore, the order of the NaFAC is neither erroneous or prejudicial to the interest of the revenue and the twin condition given in the Act is not violated. To drive home to this contention reliance was placed on various judgment but ld. AR specification drawn to our attention to the following case law to decide the issue on hand as to whether the order is in fact erroneous o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There upon notice u/s 142(1) of the IT act was issued on 17/12/2021 along with questionnaire and thereby the assessee filed the details of the purchase of equity share and sales of shares along with copy of demate account and bank statement, so as to establish the claim of the income as exempt in the return of income. Based on the details filed and after verifying the same an order dated 23/03/2022 was passed accepting the income returned by the assessee. The ld. PCIT as per the power vested u/s. 263 examined the case records of the assessment in the case of the assessee and it has been observed that the assessment order is found to be erroneous and prejudicial to the interest of the revenue because after submitting the details by the assessee the ld. AO did not draw any adverse conclusion on the issue of re-opening and accepted the income declared by the assessee in the ITR filed. The ld. PCIT further noted that the ld. AO did not examine the issue of bogus long term capital gain properly and failed to make any inquiry / investigation which was required to be done based on the report of the investigation and the Bogus long term capital gain which was required to be added was not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt income of Rs. 78,87,360/-. Notice u/s 142(1) of the IT act was issued on 17/12/2021 along with questionnaire vide ITBA/AST/F/142(1)/2021-22/1037905514(1). In response to the notice the assessee submitted his reply dated: 03.01.2022 which is as under: I have purchased 12500 equity shares of Rs. 10/- each of M/s Appu Marketing and Manufacturing Limited/Ejecta Marketing limited ( listed in Bombay stock exchange script code 538653) @ 10/- per share total amounting to Rs. 125000/- from M/s Pears Mercantile Private Limited (PAN-AAFCP8292H) on 10.01.2014. That the 12500 equity shares of Rs. 10/- has been received in DP account no 1201770100000120 with M/s Hem Security Ltd on 05.02.2014. That I have sold 11900 equity shares of Rs. 10/- through M/s hem security Itd member of Bombay stock exchange clearing member no. 248 PANAABCH8005N. The Payment against the sale has been received through payee account cheque/RTGS from M/s Hem Securities Itd. In my bank account with kotak Mahindra bank Itd on various dates during the year. That all the above documents/papers i.e purchase bill, sale bills, DP statement, Broker ledger account and Bank statement are enclosed herewith. The assessee has submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. Thus, it is very much clear that the ld. AO has applied mind on the issue and has considered the factual aspect of the claim of the assessee on the long term capital gain reflected in the return of income filed. The bench also noted from the observation of the ld. PCIT that she has raised the objection on the count that the ld. AO should have made the addition based on the report of the Investigation Mumbai. She further noted the questions asked by the assessing officer were not related to the information received from the investigation wing Mumbai. The assessing officer did not make any enquiry regarding the issue for which the case was reopened that is long term capital gain claimed by the assessee on the sales of shares of the company for which the information has been received. Thus, she noted that the ld. AO has erred in accepting the claim of the assessee as genuine ignoring the information received from the Investigation Wing and thus the ld. AO failed to consider the material available on record. Based on these facts and considering the decision of the apex court in the case of Malabar Industrial Ltd. Vs. CIT the order was held to be erroneous and prejudicial to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, than the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue because of the order of the ld. AO not made addition, cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law for which nothing has been placed on record by the ld. PCIT that view of the ld. AO is totally incorrect. In this process even the AO has no power to review his own order. In this rega ..... 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