SHIV LAXMI EXPORTS LTD,KOLKATA vs. PCIT, -5, KOLKATA

The only issue raised by the assessee in the various ground of appeal is against the invalid exercise of jurisdiction u/s 263 of the Act.

Facts in brief are that the assessee filed return of income on 26.09.2010 declaring total income of Rs. 13,263/- which was processed u/s 143(1) of the Act on Assessment Year: 2010-11 Shiv Laxmi Exports Ltd. 09.05.2011. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act for the reason that the assessee has received a sum of Rs. 1,01,00,000/- during the instant year from M/S S.S. Securities. The statutory notices were issued and duly served upon the assesse. The assesse replied all the notices/questionnaires issued by the AO by filing necessary evidences. The AO has called for information from S.S. Securities by issuing notice u/s 133(6) of the Act which was duly replied by furnishing the evidences as called for by the said party. The AO after receiving necessary details / evidences, bank statement from the assessee came to the conclusion that the assessee has received money for sale of shares amounting to Rs. 1,67,00,000/- out of which Rs. 1,01,00,000/- was received from Kotak Mahindra Bank and Rs. 60,00,000/- from Indusind Bank belonging to S.S. Securities. Finally the assessment was framed vide order dated 26.12.2017 u/s 147/143(3) accepting the said transactions of sale of shares. Thereafter the Ld. PCIT on perusal of the assessment records observed that the order passed by the AO is erroneous insofar as prejudicial to the interest of the revenue and initiated proceedings u/s 263 of the Act by issuing show cause notice u/s 263 of the Act which was replied by the assessee by submitting that the money received from S.S. securities was on account of genuine transactions and was received upon sale of shares which was examined during the course of proceedings u/s 147 of the Act and was accepted by the AO. The assesse also submitted that the re-opening was made only to verify these transactions of receipt of this amount. However the reply of the assessee did not find favour with the order of Ld. PCIT and he set aside the order passed u/s 147/143(3) dated 26.12.2017 with a direction to examine the issue de novo and framed the assessment afresh accordingly.

The Ld. Counsel vehemently submitted that the the initiation of proceedings u/s 263 the Act is invalid as the issue on which the revisionary jurisdiction was exercised has been examined at length in the re-assessment proceeidngs. The ld AR stated that the case of the assesse was re-opened only to verify and examine the receipt of money by the assesse from S.S. Securities. The ld AR also stated that the money was received as consideration for sale of equity shares to M/S S.S. Securities which Assessment Year: 2010-11 Shiv Laxmi Exports Ltd. were purchased by the assessee in the earlier years. The AO has accepted the plea of the assesse after taking into account the documents furnished by the assesse as well as filed by M/S S.S. Securities in response to notice issued u/s 133(6) of the Act. The ld AR contended that where the ld PCIT is not satisfied with manner of conducting enquires by the AO then the ld PCIT has to conduct the enquiries himself. The ld AR pointed out that ld PCIT has observed that the AO has failed to conduct the essential enquiries in the revisionary order and hence cancelled the assessment for being erroneous and prejudicial to the interest of the revenue. The ld AR in defense of arguments relied on the decision of Hon’ble Delhi High Court in the case of Director of Income Tax vs. Jyoti Foundation in 357 ITR 388 (Del). The ;ld AR also relied on the decision of Adbhut Vinimay Pvt Ltd Vs. ITO dated 24.10.2018 and Sarowar Goods Pvt. Ltd Vs ITO ITA No. 617/Kol/2020 dated 10.05.2022.The ld AR therefore prayed that the order u/s 263 of the Act may kindly be quashed.

The Ld. D.R on the other hand relied heavily on the order of Ld. PCIT.

After hearing the rival contentions and perusing the material on record, we find that the ld. PCIT has set aside the assessment framed u/s 143(3) read with Section 147 of the Act dated 26.12.2017 on the ground of being erroneous and prejudicial to the interest of the revenue after observing that the AO has not carried out essential enquiries and the information received from DDIT(Inv) was not meaning fully utilized. We note that the assessment was reopened u/s 147of the Act by the AO only to examine the issue of receipt of Rs. 1,01,00,000/ from M/s S.S Securities whereas as a matter of fact the assessee has sold equity shares which were purchased in the earlier years through the banking channel and sale consideration was received into two parts Rs. 1,01,00,000/- from Kotak Mahindra Bank and Rs. 60,00,000/- from Indusind Bank belonging to the buyer of Shares M/S S.S.Securities. The AO accepted this transaction of sale of equity shares after taking a plausible view based on the evidences filed by the assessee. We note that AO also called for information from S.S. Securities by issuing notice u/s 133(6) of the Act which were duly replied .In the present case the Assessment Year: 2010-11 Shiv Laxmi Exports Ltd. Ld. PCIT has exercised jurisdiction for the reason that the AO has not conducted the essential enquiries by mentioning wrong facts which in fact has been correctly examined by the AO in the reassessment proceedings. In our considered opinion , the Ld. PCIT cannot invoke the jurisdiction u/s 263 of the Act to dictate the AO that enquiry should be made in a particular manner or a view taken by the AO which is a plausible view is not acceptable to the Ld. PCIT and that the AO should have been taken another view. The case of the assesse finds supports from the decision of Hon’ble Delhi High Court in the case of Director of Income Tax vs. Jyoti Foundation (supra) wherein the Hon’ble High Court has held that where the revisionary authority i.e. DIT feels that enquiries were insufficient and further enquiry or details should have been called for then the enquiry should have been conducted by the DIT himself to record a view that assessment order was erroneous and he should not set aside the order and direct the AO to conduct enquiry. We note that while passing this decision the Hon’ble Delhi High Court has referred to the decisions in the case of Commissioner Of Income-Tax vs Gabriel India Ltd. in [1993] 203 ITR 108 (Bom), Commissioner of Income-taxv. Sunbeam Auto Ltd. in [2011] 332 ITR 167 (Del) and ITO Vs D.G. Housing Projects Ltd. (2012) 342 ITR 329(Del). Considering the above facts of the case, in our opinion, the order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore respectfully following the ratio laid down in the above decision, quash the order passed u/s 263 of the Act by allowing the appeal of the assessee.

In the result, the appeal of the assessee is allowed.