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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI RAJESH KUMAR & SONJOY SARMA
order
: August 31st, 2023 ORDER
Per Rajesh Kumar, Accountant Member:
This appeal preferred by the assessee is against the order passed by Learned Pr. Commissioner of Income-tax (Appeals)-15, Kolkata [hereinafter referred to Ld. ‘Pr. CIT’] dated 22.06.2020 for the Assessment Year (in short ‘AY’) 2015-16.
I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. 2. The assessee has challenged the order passed by Ld. Pr. CIT u/s 263 of the Act on various grounds as raised in the memorandum of appeal. Besides, the assessee has also raised additional ground vide letter dated 28.11.2022 which is being decided and disposed off in preference to the regular grounds of appeal
. The grounds raised by the assessee are extracted as under: “1. For that the order passed by the Ld. Pr. CIT is bad in law as well as on facts.
2. For that the Ld. Pr. CIT erred in setting aside the assessment order passed by the Ld. AO merely for the reason that the AO did not keep a copy of the report of the DIT, Kolkata in assessment records. The report being voluminous, no AO take printout of the same and refer to the soft copy of the report.
3. For that the Ld. Pr. CIT erred in setting aside the assessment order in spite of the fact the assessee duly explained that none of the parties referred to in the report implicated the assessee or referred to its transactions. Even in course of the revision proceedings, the assessee filed detailed rebuttal of copies of statement of each parties as provided by the Ld. Pr. CIT.
4. For that the Ld. Pr. CIT erred in setting aside the assessment order in spite of the fact that the specific queries relating to Capital Gain were raised in course of the assessment proceedings against which the appellant filed evidences in support of the transactions as well as the genuineness of the company (which is a profit making dividend paying company) and report of analyst in support of rise in prices of the shares.
5. For that the Ld. Pr. CIT erred in setting aside the assessment order without himself carrying out any inquiry whatsoever.
6. For that the Ld. PCIT erred in invoking the provisions of sec. 263 when he himself did not make any definite finding as to the nature of enquiry to be made when the AO made the required enquiry no fault was found in the same.
7. For that the Ld. Pr. CIT erred in setting aside the assessment order in spite of the admitted fact that the AO relied upon the decision of the jurisdiction HC and IT AT in similar cases. The Ld. Pr. CIT erred in I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. setting aside the assessment order for the reason that the AO did not rely upon the decision of the Hon hie Supreme Court in the case of CIT v Suman Poddar in [2019] 112 taxmann.com 330 (SC) whereas the said judgement was delivered on 22.11.2019 i.e. long after passing of the assessment order on 18.02.2017.
For that the order of the Ld. Pr. CIT is had in law since there is no specific finding that the order passed by the AO was erroneous and therefore prejudicial to the interest of revenue when the AO made enquiries in the proceedings u/s. 143(3) and the assessment cannot be cancelled simply because sufficient enquiry as contemplated by the Ld. Pr. CIT was not made.
9. For that the appellant craves leave to add, alter or withdraw any ground/s of appeal on or before hearing of the appeal. Additional Ground: “10. For that the revision order passed by Ld. Pr. CIT without generating DIN No. is bad in law and therefore liable to be quashed.”
At the outset, Ld. A/R submitted that the grounds raised by the assessee is a legal issue which is apparent from the revisionary order passed u/s 263 of the Act dated 22.06.2020 passed by Ld. Pr. CIT without mentioning the DIN in the said order. Ld. A/R submitted that the said non-mentioning of DIN is apparent form the revisionary order passed u/s 263 of the Act and no further verification of facts is required to be done. Ld. A/R therefore, prayed that the assessee is well within his legal rights to raise this additional ground. In defence of his arguments, the ld. AR relied on the decisions of the Hon'ble Apex Court in National Thermal Power Co. Ltd. Vs CIT (1999)229 ITR 383 (SC) and Jute Corporation of India Ltd. Vs CIT (1991)187 ITR 688 (SC) wherein the Hon'ble Apex Court has held that the assessee is within its rights to raise any issue which has not been raised before the authorities below.
I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. Accordingly, Ld. A/R prayed that the same may kindly be admitted for adjudication.
Ld. D/R on the other hand, submitted that the issue has been raised for the first time before this tribunal that DIN has not been mentioned in the order passed by the ld. PCIT u/s 263 of the Act and therefore, the assessee could not be allowed to raise these grounds at this stage. Ld. D/R alternatively argued that issue of non-mentioning of DIN in the order of ld. PCIT may kindly be restored to the ld. PCIT so that the same could be mentioned in the revisionary order.
We have heard rival contentions and perused the material on record. We find that the additional ground has been raised with respect to non-stating of DIN in the revisionary order passed u/s 263 of the Act and is a purely a legal issue the facts whereof are available in the file/revisionary order and no further verification is to be done at the end of Ld. Pr. CIT. We have perused the order passed u/s 263 of the Act by Ld. Pr. CIT and observe that the DIN, which is mandatory, has not been quoted in the said order. Accordingly, we are inclined to admit the said additional ground for adjudication in view of the ratio laid down by the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. CIT (supra) and Jute Corporation of India Ltd. Vs CIT (Supra).
Ld. AR at the outset, brought to our notice that non- mentioning of DIN is fatal and goes to the root of the matter as it is mandatory in the nature and has to be mentioned in the revisionary order passed u/s 263 of the Act dated 26.02.2020. Ld. A/R while referring to the CBDT Instruction no. 19/2019 dated Page 4 of 12 I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. 14.08.2019 para 2 argued that it specifically provided that no communication shall be issued by any income tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person on or after the 1st day of October 2019 unless a computer generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of such communication. Ld. A/R further submitted that in para 4 of the said Instruction it is provided that any communication which is not in conformity with para 2 & 3 of the said Circular/Instruction shall be treated as invalid and shall be deemed to have been never issued. Ld. A/R also stated that certain exceptions have carved out in the said Instruction where the mentioning of DIN in the communication/orders has been dispensed with. Ld. A/R submitted that the case of the assessee is not covered in the exceptions provided. Ld. A/R while referring to provisions of Section 119(2)(a) of the Income Tax Act, 1961 (in short the 'Act') submitted that instructions have to be followed by the Departmental officers and CBDT issued Instruction u/s 119(1) of the Act to issue orders/instructions u/s 119(2)(a) of the Act which the authorities below shall follow. Ld. A/R referred and relied on two decisions of Coordinate Benches in the case of Tata Medical Centre Trust Vs. CIT in order dated 18.07.2022 and in the case of Smt. Sunita Agarwal Vs. ITO in ITA No. 432/KOL/2020 order dated 22.11.2022. Ld. A/R therefore, prayed that the revisionary order passed by Ld. Pr. CIT without generation of DIN and mentioning the same on the said revisionary I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. order renders it to be invalid and non-est in the eyes of law and may kindly be quashed.
Even on merit, Ld. A/R submitted that the case of the assessee is very strong as the issue which was raised by Ld. Pr. CIT in the revisionary order has been examined by Ld. AO in the assessment proceedings. Ld. A/R vehemently submitted before us that the issue of claim u/s 10(38) of the Act of LTCG by the assessee on sale of shares of CCL International Ltd. was examined by Ld. AO during the assessment proceedings. Ld. A/R submitted that the notice issued by Ld. AO u/s 142(1) of the Act dated 15.09.2017 wherein the AO has specifically asked a query qua the LTCG along with purchase and sale of shares etc. which were responded by the assessee vide reply dated 22.09.2017 wherein the assessee has filed detailed explanation in respect of LTCG along with contract notes etc. Again, after the AO issued show cause notice on 11.10.2017 the assessee replied and filed before the AO the audited financial statement of CCL International Ltd. etc. along with de-mat account. Ld. A/R contended that, since the AO has examined the issue after calling upon the assessee to furnished the evidences on such issue and after examining the same, he has taken a plausible view on the issue and thus Ld. Pr. CIT has no jurisdiction u/s 263 of the Act to invoke the revisionary proceedings and set aside the order passed by Ld. AO dated 18.10.2017. In defence of his argument Ld. A/R relied on a decision of the coordinate bench in Kaushalya Dealers (P) Ltd. Vs. ITO in order dated 10.12.2021 wherein the coordinate bench has quashed the revisionary order of Ld. Pr. CIT revising the assessment under similar facts. The coordinate bench Page 6 of 12 I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. has quashed order passed by Pr. CIT by holding that Ld. Pr. CIT has no power to revise the assessment on the ground of lack of enquiry where the AO has called for information from the assessee and the assessee has duly responded all these queries of the AO on the issue. Ld. A/R submitted that the said decision has been affirmed vide order dated 24.11.2022 in PCIT Vs Kaushalya Dealers Pvt Ltd. ITAT/72/2022 IA No.GA/1/2022. Ld. A/R therefore, prayed that even on merit the order passed by Ld. Pr. CIT has to be quashed as it has been passed in contrary to the provisions of Section 263 of the Act and also in view of the ratio laid down by various judicial pronouncements.
8. Ld. D/R on the other hand, relied on the order of Ld. Pr. CIT by submitting that no prejudice is caused to the assessee by exercise of the revisionary power by Ld. Pr. CIT as in the set aside proceedings the assessee would be given full and adequate opportunity to respond to various queries by the AO and therefore, prayed that the appeal of the assessee may kindly be dismissed.
We have heard rival contentions and perused the material on record. We observe from the revisionary order that mandatory DIN has not been mentioned on the order passed by ld. PCIT u/s 263 of the Act. In our view the no- mentioning of DIN would render the order as invalid and non-est as has been held in the coordinate benches in decisions in Tata Medical Centre Trust Vs. CIT in order dated 18.07.2022 and in the case of Smt. Sunita Agarwal Vs. ITO in ITA No. 432/KOL/2020 order dated 22.11.2022. Therefore, we hold the revisionary order passed by the ld. PCIT to be invalid. We observe from the facts of the case that I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. even on merit the issue has been examined and discussed by Ld. AO after issuing notice u/s 142(1) of the Act dated 15.09.2017 which was replied by the assessee on 22.09.2017 giving details of LTCG, de-mat accounts submitting all the financial details etc. of CCL International Ltd. We note that the issue has been dealt with by Ld. AO in the assessment proceedings and a plausible view has been taken and the contention of the assessee was accepted. Under these circumstances, we are not in a position to subscribe to the view taken by Ld. Pr. CIT in revising the assessment u/s 263 of the Act. In our opinion, if the AO has examined the issue on the basis of documents furnished by the assessee and taken a plausible view then the jurisdiction u/s 263 of the Act is not available to Ld. Pr. CIT to set aside the assessment framed. The case of the assessee find support from the decision of the Coordinate Bench in the case of Kaushalya Dealers (P) Ltd. (supra) relevant portion of which is reproduced below: “The facts of. the case is that during the F.Y-2014-15 the assessee had shown Long Term Capital Gain (LTCG) for an amount of Rs. 47,49,773/- on sale of shares of the company Viz. CCL International Ltd. and availed exemption U/s. 10(38) of the IT Act, 1961. In this case, departmental information was available to the effect that CCL International Ltd was a “penny stock”, whose shares had been rigged/ manipulated to generate bogus Long Term Capital Gain (LTCG), with a view to claim tax exemption under Sec. 10(38) of the IT Act. ln the instant case the Assessing Officer did not keep the detailed report received from the Directorate of Income Tax (Inv.), Kolkata, which was disseminated to all the A.Os. through EFS Instruction No. 53 issued by DIT (Systems) vide letter No. F. No. 1/11/CIB/Soft/94- DIT(S)/Vol.III/Part/ dated 08.03.2016 on the assessment folder. He also ignored / failed to take note of letter No. F. No. 287/30/2014- IT(Inv.II)-Vol-III dated 16.03.2016 (enclosed as ‘Annexure-1’ to this order), issued by the Deputy Secretary (Inv.II), CBDT, whereby the AOs had been informed about the investigation conducted by Kolkata I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. Investigation Directorate in respect of large number of penny stock companies, whose share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries. Extensive investigation, including search and seizure / survey action on entry providers, market manipulators, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate had uploaded details of such information in respect of individual assesses, who had made transactions in such penny stocks. The AOs. had been advised to utilize such detailed information while finalizing the assessment. But in spite of such advisory and adverse material available in the system, the AO. failed to utilize the material, nor did he confront the adverse material to the assessee for his comments. He merely kept the documents supplied by the assessee on record and wrote a routine letter to the assessee’s share broker to confirm the purchase and sale of shares through it and on receipt of a positive reply from the share broker, completed the assessment accepting huge Long Term Capital Gains of Rs. 47,49,773/-, without taking into consideration the statements of various entry operators / share dealers who had admitted that shares of CCL International Ltd. were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries. The AO also failed to analyze the DIT's report and the various names of the brokers and share dealers who were perpetrating the large economic scam adopting this unique modus operandi of artificially hiking the share price even when there was no inherent value of the company to generate the bogus LTCG. 9.1 Moreover, the A.O. also did not consider other surrounding circumstances such as no worthwhile profit or dividend paying record of the said CCL International Ltd. in the past years to command such fancy valuation / rise in its share price from Rs. 49.88 per share in June, 2013 to an average of Rs. 630/- per share in October, 2014 I January, 2015. A mere perusal of the performance, as below, of the company whose share value jumped from Rs 49.88 to Rs 630 in one year as should raise any investigator’s investigative skills but the AO totally ignored all the evidences lying before him. CCL F.Y. 2012- F.Y. 2013-14 F.Y. 2014-15 International Ltd 13 A.Y. 2013- A.Y. 2014-15 A.Y. 2015-16 14 I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. Equity share 19.19 Cr. 19.19 Cr. 19.19 Cr. capital Sales during the 77.29 Cr. 79.60 Cr. 94.34 Cr. year Profit/Loss during 1.74 Cr. 0.99 Cr. 1.02 Cr. the year Earning per 0.18 paisa 0.10 paisa 0.11 paisa share (Rs) Equity Dividend NIL 0.05 paisa 0.05 paisa (%) (2.5%) 10. Hence, on appreciation of the facts narrated above, there is no manner of doubt that the A.O. for reasons best known to him had ignored the adverse evidence available against the assessee by not bringing it on record ( he did not keep such material in the assessment folder but only kept the papers / documents submitted by the assessee in the assessment folder) and also did not confront the assessee with such adverse material for his rebuttal, if any, so that a judicious inference could be drawn. In this context, I refer to the Hon'ble Calcutta High Court in the case of CIT Vs. Maithan International (2015) 375 ITR 123 (Cal), where it held that the “Assessing Officer, occupying the position of an investigator and adjudicator, cannot discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to had been faithfully conducted". 10.1. Upholding the action of the Pr.CIT in invoking his revisional jurisdiction u/s. 263 of the Act, the Hon’ble Calcutta High Court in Rajmandir Estates (P) Ltd. Vs. Pr.CIT (2016) 386 ITR 162 (Cal) held that “where the A.O. had failed to conduct requisite investigation except calling for routine information from the assessee and some information u/s. 133(6) on test check basis, revision u/s 263 is valid”. This decision of the Hon’ble Calcutta High Court was confirmed on merit by the Apex Court in Rajmandir Estates Pvt. Ltd. (2017) 77 taxman.com 285 (SC)/ (2017) 245 Taxman 127 (SC). Similarly, the Hon’ble High Court of Orissa in the case of Umashankar Rice Mill v. CIT (1991) 187 ITR 638 (Ori.) has observed that where the Commissioner felt that proper enquiry was not made by the AO during the assessment proceeding, he was justified in invoking the provisions of section 263 in respect of the order passed by the AO.
I.T.A. No.: 431/KOL/2020 Assessment Year: 2015-16 Shri Budhraj Agarwal. 10.2. In this context, reference can also be made to the decisions of Hon’ble Supreme Court in the cases of Ramapyari Devi Saraogi (1968) 67 ITR 84 (SC) and Smt. Taradevi Agarwal Vs CIT (1973) 88 ITR 323 (SC), wherein the Hon’ble Apex Court has held that lack of adequate enquiry or verification at the relevant time by the AO would constitute “prejudice to the interest of revenue” and would make such order “erroneous". Reference in this context is invited to the decision of Delhi High Court in the case of GEE VEE Enterprise Vs. Addl. CIT (1975) 99 ITR 375 (Del) and Duggal & Co v. CIT(1996) 226 ITR456(Del), wherein it has been held as under: “The ITO is not only an adjudicator, but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls further enquiry. It is incumbent on the AO to further investigate the facts stated in the return, when circumstances would make such an enquiry prudent. The word “erroneous" in section 263 includes the failure to make such enquiry.”
We also note that the said decision of the Coordinate Bench has been affirmed by the Hon'ble Jurisdictional High Court vide order dated 24.11.2022 in PCIT Vs Kaushalya Dealers Pvt Ltd. ITAT/72/2022 IA No.GA/1/2022.
In the result, the appeal filed by the assessee is allowed in the legal issue as well as on merit. Kolkata, the 31st August, 2023.