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Income Tax Appellate Tribunal, “F” BENCH, NEW DELHI
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the Ld. Principal Commissioner of Income-Tax (Central),Delhi-3 [hereinafter referred to as “PCIT”] dated 05.03.2021, in exercise of his revisionary powers under Section 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year 2016-17.
The order of the Ld. PCIT reveals that he found the assessment order passed in the case of the assessee u/s 143(3) of the Act to be erroneous so as to cause prejudice to the Revenue for the reason that the assessee’s claim of Long Term Capital Gains u/s 10(38) of the Act to the tune of Rs.2,05,58,890/- was not duly inquired into by the Assessing Officer - more particularly when the shares traded in by the assessee were found by the Investigation Wing of the Department to be of a Penny Stock Company whose prices were deliberately rigged so as to introduce unaccounted income of the persons who wished to avail this facility as Long Term Capital Gains exempt from tax. The shares so traded in by the assessee related to M/s Fidelo Power & Infrastructure Limited which later on merged with M/s. Yamini Investments Co. Ltd.5 lakh shares of M/s Fidelo Power & Infrastructure Limited were purchased by the assessee for Re.1 only per unit.After merger of this company with M/s. Yamini Investments Co. Ltd., 4 lakh shares of M/s. Yamini Investments Co. Ltd. were allotted to the company in-lieu of 5 lakhs shares of M/s. Fidelo Power & Infrastructure Limited at a rate of Rs.1.25 per share. These shares were subsequently sold immediately on completion of a year of purchase of the same at a price of Rs. 51 to Rs.55 per unit which was noted to be more than 40 times of the primary investment. Thus, resulting in huge capital gain of Rs.2.05 crores to the assessee claimed as exempt u/s 10(38) of the Act.
The order of the Ld. PCIT reveals that it was a matter of record that the investigation and inquiries conducted by the Investigation Wing, Kolkata had clearly identified M/s. Yamini Investments Co. Ltd. as a Penny Stock Company, utilized by middlemen/brokers to provide bogus Long Term Capital Gain entries to the needy buyers who had unaccounted cash with them and were desirous of escaping due income-tax liability on them by camouflaging this unaccounted income as exempt Long Term Capital Gain. All these facts stand recorded at paragraph nos. 2 and 3 of the order of the Ld. PCIT.
The assessee raised several contentions before the Ld. PCIT which were to the effect that the issue was examined during assessment proceedings and that if the report of the Investigation Wing was available with the Assessing Officer, he must have considered it while accepting the assessee’s claim of Long Term Capital Gain exempt u/s 10(38) of the Act and if it was not available with the Assessing Officer, then the order cannot be said to be prejudicial as the information was not with the Assessing Officer. The Ld. PCIT rejected all the contentions raised by the assessee holding that even if inquiry was conducted by the Assessing Officer during assessment proceedings, they were not sufficient because the Assessing Officer had not examined it in the light of the report from the Investigation Wing of the entity being a Penny Stock Company whose shares being traded in by the assessee. He further went on to hold that it was not necessary that the report to have formed part of the assessment records and even if this information was not available with the Assessing Officer of the assessee, but since it was part of the record of the Department that the share traded in by the assessee being related to the Penny Stock Company, the same was to be considered as record for the purposes of exercising revisionary power u/s 263 of the Act. He referred to the decision of the Hon’ble Apex Court in the case of CIT Vs. Shree Manjunathesware Packing Products & Camphor Works, (1997) 231 ITR 53 (SC), which, he pointed out, held that it was open to the Commissioner to take into consideration all the records available at the time of examination by him. Accordingly, he held the assessment order passed to be erroneous causing prejudice to the Revenue on account of the Assessing Officer’s failure to verify and act upon the piece of information which was available from reliable sources, which clearly put the transactions of purchase and sales of shares of a penny stock company dubious in nature. He accordingly set aside the assessment order directing him to carry out thorough and detailed inquiries to ascertain the genuineness of the sources of earning the alleged exempt income of Rs.2.05 crores by the assessee. His findings in this regard are contained at paragraph Nos. 9 to 11 which are reproduced as under:-
“9.i In the present case, the Assessing Officer not only failed in verifying and calling for information from third/independent parties and conduct proper enquiries / investigation but also to ‘Act’ upon the piece of information already available from reliable sources which clearly put the transactions of purchase and sales of shares of a penny stock company dubious in nature. The report from the Investigation Wing has clearly identified M/s Yamini Investment Co. Ltd. as a penny stock company which is engaged in the business of providing accommodation entries in the garb of bogus Long Term Capital Gains to the needy beneficiaries who have unaccounted income in cash.
9.ii Hence, it is apparently clear that the claim of earning exempt income of Rs.2,05,58,890/- by the assessee in the garb of Long Term CapitalGains claimed as exempt u/s 10(38) of the Income Tax Act, 1961 was accepted by the assessing officer without desirable examination & inquiries as elaborated above and without proper scrutiny which is totally in contravention to the provisions of section 68 of the I.T. Act, 1961.
9.iii Ascertaining the genuineness of the sources of exempt income claimed by the assessee is the duty of the Assessing Officer which he clearly failed to discharge.
9.iv The AO is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is also his duty to ascertain truth of the facts. Thus, on this issue the AO’s order is cryptic and not a self- contained order giving the relevant facts and reasons for coming to conclusion based on those facts and law and the order does not indicate the briefest of reasons for accepting the contention of the assessee.
9.v In the present case it is clear that the tax which was lawfully exigible has not been imposed by the AO by accepting the contention of the assessee in respect of dubious natured unsecured loans without verifying and investigating the genuineness of such sources of funds found recorded in the books of the assessee.
10. In view of above-mentioned facts and circumstances of the case, it can clearly be concluded that the assessment order for A.Y. 2010-11 was passed without any inquiry and it can also be held that this action of the assessing officer is not only erroneous but also prejudicial to the interest of revenue. Therefore, the assessment order dated 27.12.2018 is required to be revised by virtue of the provisions of Section 263 of the Income Tax Act, 19611 For the sake of clarity, the relevant portion of Section 263 of the Income Tax Act, 1961 is reproduced as under:
“....2.63(1) The (Principal Commissioner or) 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 therevenue, 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....’’ Further, the Explanation 2 below the section 263(1) also states as under:
…… Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court, in the case of the assessee or any other person...”
11. Hence in view of foregoing, I satisfied and hold the assessment order for A.Y. 2010-11 dated 27.12.2018 passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 as erroneous and prejudicial to the interest of Revenue and therefore, set aside it for fresh adjudication by the Assessing Officer with the directions tocarry out through and detailed enquiriesto ascertain thegenuineness of the sources of earning the alleged exempt incomeof Rs.2,05,58,890/- by the assessee as well as the transactions of acquiring/purchase and sale of shares of M/s Yamini Investment Co. Ltd. in the light of the information available on records from various sources and after giving an opportunity of being heard to the assessee.”
Aggrieved by the order of the Ld. PCIT, the assessee has come up in appeal before us raising the following grounds:- “1. The order passed by Ld. Pr. CIT is bad in law and on facts of dye case.
2. That on the facts of the case and under the circumstances, the Ld. Pr.CIT has erred in invoking the provisions of section 263 of the Act.
3. That on the facts of the case and under the circumstances, the Ld. Pr.CIT has erred in not appreciating the facts and submission of theassessee that the inadequate enquiry cannot be a ground for invokingthe provisions of section 263 of the Act.
4. That on the facts of the case and under the circumstances, the Ld. Pr.CIT has erred in not appreciating the submission of the assessee that ifthe information from Investigation wing was available with the Assessing Officer, it is incorrect to presume that he has not consideredthe same and if the report is received after passing of assessment order,it cannot be said that the assessment order is erroneous andprejudicial to the interest of revenue.
5. That on the facts of the case and under the circumstances, the Ld. Pr.CIT has erred in not appreciating the submission of the assessee thatshares of M/s Yamini Investment Co Ltd. were acquired on merger ofM/s Fidelo Power & Infrastructure Limited and there has been noexponential rise in the prices of the shares of M/s Yamini InvestmentCo Ltd.
6. That on the facts of the case and under the circumstances, the Ld. Pr.CIT has erred in not appreciating the submission of the assesses thatshares of M/s Yamini Investment Co Ltd. were acquired on merger ofM/s Fidelo Power & Infrastructure Limited pursuant to the scheme ofmerger approved by the Hon’ble High Courts of Bombay and Delhirespectively.
7. That on the facts of the case and under the circumstances, the Ld. Pr.CIT has erred in not appreciating the submission of the assessee thatthere has been no any exponential increase in the prices of shares ofM/s Yamini Investment Co Ltd. from the date of merger to the date oftransfer of shares by the assessee.
8. That the Ld. Pr. CIT has erred in observing that the Assessing Officer has completed the assessment without proper verification and investigation and holding that the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue.
9. That the Ld. Pr. CIT has erred, in ignoring the submissions/ documentary evidence submitted by the assessee during the assessment and revisionary proceedings, and recording factually incorrect finding while holding that the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue.
10. That the Ld. Pr. CIT has erred in not appreciating that during the course of assessment proceedings the assessee has filed all the details in respect of the issues raised by the Assessing Officer much before the completion of assessment proceedings and the Assessing Officer has also made proper and meaningful enquiries before taking a final conclusion vis-a-vis framing final assessment.
11. That the Ld. Pr. CIT has erred in passing the revision order without considering and providing of documents on the specific request of the assessee made during the revision proceedings for making available the copy of report of Kolkata Investigation wing where the name of company M/s Yamini Investment Co Ltd has been referred being involved in providing bogus LTCG.
12. That the Ld. Pr. CIT has erred in observing that the Assessing Officer has completed the assessment without making enquiries to ascertain the genuineness of the purchases of shares of M/s Fidelo Power & Infrastructure Limited whereas the shares were purchased in F.Y. 2013- 14 and the same has been duly subjected to Scrutiny assessment under the provisions of Section 143(3) of the Income Tax Act.
13. That the Ld. Pr. CIT has erred in holding the assessment order for A.Y.2010-11 as erroneous and prejudicial to the interest of revenue as per para 10 and 11 of the Order u/s 263, whereas the revision proceedings have been initiated in respect of A.Y.2016-17.
14. That the Ld. Pr. CIT has erred in holding the assessment order as erroneous and prejudicial to the interest of revenue by observing in para “9.v” of the Order u/s 263 that “the tax which was lawfully exigible has not been imposed by the AO by accepting the contention of the assessee in respect of dubious natured unsecured loans”, whereasthe revision proceedings have been initiated in respect of Long- TermCapitalGain transactions.
15. That the Ld. Pr. CIT has erred in not appreciating the fact that theassessee has not only invested in the shares of M/s Yamini InvestmentCo Ltdrather invested in other non-listed companies also and henceassessee is a regular investor.
16. That the Ld. Pr. CIT has erred in terming the order of theOfficeras erroneous and prejudicial to interest of revenue onAssessingthe basisof surmises and conjectures.”
During the course of hearing before us, none appeared on behalf of the assessee, nor any application was filed seeking adjournment. We have noted that it was the 21st occasion when the matter came up for hearing before us and on the immediately previous occasion also none had appeared on behalf of the assessee and also that on several occasions in the past the hearing in the appeal had been adjourned at the request of the ld. Counsel for the assessee. It was noted from all these facts that the assessee was not interested in pursuing its appeal and since long time had elapsed and sufficient opportunity of hearing had been given to the assessee, it was decided to proceed with adjudicating the present appeal on the basis of material already on record and with the assistance of the Departmental Representative.
We have noted that the assessee has filed an application for admission of additional grounds of appeal under Rule 11 of the ITAT Rules, 1962 vide application dated 13.09.2023 and it was submitted that the grounds raised are all legal in nature and therefore need to be admitted in terms of the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd Vs Commissioner of Income Tax, [1998] 229 ITR 383 (SC). The additional grounds raised by the assessee, numbering 9 in all, read as under:-
“1. Ld. PCIT erred in not giving any categorical finding as to when and whether the so called report of the investigation wing of Calcutta was received by the Ld. AO before completion of the assessment and if so whether the same were forming part of the assessment record of the assessee for the assessment year 2016- 17.
2.Ld. PCIT erred in passing the order u/s 263 of the Actwithout providing a copy of the so called investigation report ofthe investigation wing of Calcutta relied upon by him for issuingshow cause notice as well as for setting aside the assessmentorder u/s 263 of the Act inspite of specific request to that effectmade by the Appellant - thus grossly violating the principles ofnatural justice.
3.Ld. PCIT erred in holding that as per clause (b) toExplanation 1 to section 263 of the Act the report of theinvestigation wing of Calcutta even if not available to the Assessing Officer while completing the assessment would still constitute ’‘record’for the purposes of section 263 of the Act if the same wasavailable at the time of examination by PCIT.
4.Ld. PCIT erred in not appreciating that the records ‘relating to any proceeding under the act’ only means records of an existing proceeding under the act pending in the case of that assessee which may become available to the PCIT when he was examining the records. For example replies to a notice u/s 133(6) or 131 issued in the case of the assessee but received after completing the assessment that are available to PCIT that would not be available to the AO when he completed the assessment.
5.Ld. PCIT erred in not appreciating that the “record” for the purpose of Explanation 1(b) to section 263 of the Act would not include the report of the investigation wing of Income Tax Department Calcutta which was not available before the AO while passing the assessment order.
6.Ld. PCIT erred in not appreciating that the “record” for the purpose of Explanation 1(b) to section 263 of the Act would only include thoserelating to the proceeding in the case of the assessee alone and not those relating to the proceeding under the Act in the case of some other assessee which became available at the time of examination by PCIT.
7.Ld. PCIT erred in not appreciating that the phrase “all record relating to any proceeding under this Act” refers only to the records of a proceeding in the case of the specific assessee and not those in the case of some other assessee.
8.Ld. PCIT erred in not appreciating that the phrase “all record relating to any proceeding under this Act” refers only to the record of an existing proceeding and not the ones already completed or even contemplated.
Ld. PCIT erred in not appreciating that if his interpretation of clause (b) to Explanation 1 of section 263 is accepted the same would lead to absurd result as PCIT can then hold every assessment order erroneous on receipt of new information from other authority even after completion of the assessment proceedings thus rendering provisions such as section 148 and 153C etc. nugatory.
Further, there is another application on record before us seeking admission of another additional ground which has been filed before us vide application dated 14.11.2023 and the said grounds read as under:-
At the outset, the Appellant seeks leave of this Hon’ble Tribunal under Rule 11 of ITAT Rules, 1962 to raise further an additional ground of appeal to the effect that “the act of setting aside the original assessment order and remitting the matter back to the Assessing Officer for further inquiry is only an empty formality and a farce as the PCIT has already returned an adverse conclusion on the issue and the Assessing Officer is left with no discretion to take any different view on the matter.
9. Since the grounds raised by the assessee challenge the order passed by the Ld. PCIT on the legal aspect as to whether the information referred to by the Ld. PCIT could be treated to be forming part of the record for the purposes of Section 263 of the Act and as to the findings of the Ld. PCIT that no inquiry was made by the Assessing Officer on the issue identified, we admit the additional grounds for adjudication.
10. Considering the original grounds raised by the assessee and the additional grounds raised, what is culled out is that the primary contention against the order passed by the Ld. PCIT u/s 263 in the present case is on the following grounds:-
(i) That the Ld. PCIT has assumed jurisdiction to revise the order of the Assessing Officer noting incorrect facts; (ii) That it was not clear from the order of the Ld. PCIT as to how the report of the Investigation Wing, Kolkata could be part of the record which the Ld. PCIT could have perused for the purposes of assuming jurisdiction u/s 263 of the Act; (iii) That the order passed was in gross violation of theprinciple of natural justice since the assessee was not confronted with the so-called report of the Investigation Wing despite specific request made by the assessee in this regard; (iv) That Ld. PCIT having arrived at a categorical finding that the Long Term Capital Gain was a bogus transaction in a penny stock share, his order directing the Assessing Officer to verify the said transaction serves no purpose and was only an empty formality and a farce since the Assessing Officer was left with no discretion to take any different view on the matter; (v) That on merits, since all evidences were filed by the assessee proving the genuineness of the transactions, there was no case at all for treating the impugned transaction as a bogus transaction;
11. On the basis of whatever material is available on record, we shall adjudicate all the issues taken up by the assessee.
Taking up first the aspect of the report of the Investigation Wing not forming part of the record, the contention of the Ld. Counsel for the assessee in this regard is many fold: a) The Ld. PCIT has not clarified as to whether it formed part of the assessment records or not. b) If it did not form part of the assessment records, the assessment order could not be held to be erroneous for not taking cognizance of the same. c) If the information was obtained subsequent to the passing of the assessment order, it could not be treated as part of the “records”. d) If it did not form part of the record of the assessment at all, but related to some information available with the Department, it could, in any case, not be treated as part of the record.
We have considered the contention of the assessee and we hold that the above arguments of the assessee are devoid of any merit and deserve to be rejected. i. The Ld.PCIT has rejected this contention of the assessee before it noting that the Hon’ble Apex Court in the case of CIT vs Shree Manjunatheshware Packing Products 231 ITR 53 (SC) has held that during proceedings u/s 263, it was open to the commissioner to take into consideration all the records available at the time of examination by him.The Hon’ble Gujarat High court followed the proposition laid down by the Apex Court,in the case of CIT Vs. VallabhdasVithaldas& Another, 253 ITR 543 (Guj) and held that “record” would include all records relating to any proceedings under the direct tax laws available at the time of examination by the Commissioner. The findings of the Hon’ble court in this regard are as under:-
“9. In our opinion, the legislative amendments to section 263, particularly by way of Explanation as inserted by the Finance Act, 1988, and the further amendment therein by the Finance Act, 1989, and the decision of the Apex Court in Shree Manjunathesware Packing Products & Camphor Works' case (supra) have put the controversy beyond any doubt. Upset by the narrow judicial interpretation of the word 'record' in section 263(1), the Legislature stepped in to eliminate litigation and to clarify the legislative intent in respect of the provisions in the three Direct Tax Acts. In the statement of objects and reasons to the Finance Act, 1988, it was stated that the proposed amendments are intended to make it clear that 'record' would include all records relating to any proceedings under the concerned direct tax laws available at the time of examination by the Commissioner. Even thereafter, a doubt was raised and some of the appellate authorities took the view that the Explanation inserted by the Finance Act, 1988, was applicable to the orders which are passed by the Commissioner after 1-6- 1988, when the Finance Act, 1988, came into force. The Legislature again stepped in through the Finance Act, 1989, so as to clarify that the provisions of the Explanation to section 263(1) shall be deemed to have always been in existence. After considering the aforesaid legislative history, the Apex Court has interpreted the word 'record' in section 263(1) in the following words : ". . . The revisional power conferred on the Commissioner under section 263 is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue. After examining the record and after making or causing to be made an enquiry, if he considers the order to be erroneous, then he can pass the order thereon as the circumstances of the case justify. Obviously, as a result of the enquiry, he may come into possession of new material and he would be entitled to take that new material into account. If the material, which was not available to the Income-tax Officer when he made the assessment could thus be taken into consideration by the Commissioner after holding an enquiry, there is no reason why the material which had already come on record though subsequent to the making of the assessment, cannot be taken into consideration by him. Moreover, in view of the clear words used in clause (b) of the Explanation to section 263(1), it has to be held that while calling for and examining the record of any proceeding under section 263(1), it is and it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination." (p. 54)
In our view, the aforesaid observations of the Apex Court clearly give the widest meaning to the word 'record'. It is also pertinent to note that while section 263(1) uses the word 'record', the Explanation goes further and states that the record includes all records relating to any proceeding under this Act. The use of the plural 'records' and 'relating to any proceeding under this Act' does not permit any limitation being placed on the power of the Commissioner that the power under section 263(1) can be exercised only on the basis of the statements which are recorded in the course of search and seizure operations in respect of the very assessee and not in respect of any other person. The Apex Court has in terms overruled the decision of the Calcutta High Court in Ganga Properties' case (supra) on which the Tribunal had relied while passing the order giving rise to these references.
As regards the reasoning which appealed to the Tribunal, the word 'therein' is not necessarily capable of the interpretation which appealed to the Tribunal. When the Commissioner examines the record of search and seizure operations in respect of any person, say, the respondent-assessees' son as in the instant case, and finds that such person had attributed some undisclosed income to the assessee, it is open to the Commissioner to call for the record in the assessee's case. The exercise of power by the Commissioner under section 263(1) is obviously in respect of the assessee's case but for the purpose of exercising that power, the examination by the Commissioner is not required to be confined to the record of that assessee's case as such record could be any record relating to any proceeding under the Act. There is nothing in the provisions of section 263(1) to take such a narrow view of the powers of the Commissioner. Any doubt which could arise has been removed by the Legislature by inserting through the Finance Act, 1988, an Explanation and further amending it by the Finance Act, 1989. The interpretation of the provisions of section 263(1), read with the Explanation thereto by the Apex Court in the light of the legislative intent leaves no room for doubt.” ii. This view is reiterated by the Hon’ble Gujarat High Court in the case of CIT Vs. Vs. Arunaben Sumankumar, [2002] 124 Taxman 57 (Gujarat); and the Hon’ble Allahabad High Court in the case of CIT Vs. Prakashwati, 276 ITR 575;(All).
Therefore,it is settled that “records” for the purposes of section 263 of the Act refers to all records relating to any proceedings available with the commissioner. In the facts of the present case, it’s the report of the Investigation Wing, Kolkata which pointed out that the entity in whose shares the assessee had traded,to be a penny stock company. Therefore the information was available with the department and in view of the judicial decisions, as noted above, we have no doubt in holding that this information could also be termed as record for the purposes of assuming jurisdiction u/s 263 of the Act by the Ld. PCIT whether or not available in the records of the assessee. Therefore, this contention raised by the ld. Counsel for the assessee is dismissed.
His other contention that the Ld. PCIT had recorded incorrect findingsto the effect that no inquiry was conducted by the Assessing Officer on the issueof Long Term Capital Gain,for holding the assessment order erroneous so as to cause prejudice to the Revenue, we find merits no consideration. The Ld. PCIT has recorded a finding to the effect that the Assessing Officer did not inquire into the issue of Long Term Capital Gains claimed by the assessee as exempt in the light of the information available with the Department that the shares traded in by the assessee was of a penny stock company.(emphasis provided by us). It is not the case of the assessee before us that adequate inquiries were made by the Assessing Officer in the backdrop of this information available with the Department. Therefore, it is a fact on record which is not disputed that the inquiries conducted by the Assessing Officer during assessment proceedings were not in the light of the information available of the shares being that relating to a penny stock company. Undoubtedly, the findings of the Ld. PCIT, therefore, that the Assessing Officer had not conducted proper inquiry on the issue is absolutely correct. What the Assessing Officer has merely done is that he asked the assessee to substantiate the genuineness of the Long Term Capital Gains claimed by him as exempt in response to which the assessee filed documentary evidences of purchase and sales of shares through a broker. On perusing which the Assessing Officer was satisfied about the genuineness of the claim. Surely, he made no inquiries regarding the genuineness of the transactions considering the report of the Investigation Wing that the shares were that of a penny stock company. Therefore, we do not agree with the contentions of the assessee that adequate inquiries were made on the issue during assessment proceedings.
The next contention of the assessee that jurisdiction u/s 263 of the Act was assumed by noting incorrect facts by the Ld. PCIT. We have noted from the written submission filed before us that the said facts pertained/ related to no inquiry being conducted by the Assessing Officer on the issue andthe”records” revealing the stock traded in by the assessee to be that of a penny stock company. The arguments of the Ld. Counsel for the assessee with respect to both the issues are same as were raised in relation to his arguments/contentions that adequate inquiry was conducted by the Assessing Officer and the information with the Ld. PCIT could not be said to have formed a part of the record of the assessee. Both the above arguments have been rejected by us above in paragraph nos. 12-14 above. Therefore, this contention of the Ld. Counsel for the assessee that the Ld. PCIT had recorded incorrect facts while assuming jurisdiction u/s 263 of the Act merits no consideration.
The contention of the assessee that the assessee had demonstrated with documents that the transaction was genuine and even on merits therefore there was no case for treating the transaction to be bogus, again we hold merits no consideration since the transaction was undoubtedly not examined by the Assessing Officer in the light of information available regarding the shares traded in by the assessee pertaining to that of a penny stock company.
Taking up the last contention of the assessee that since the Ld. PCIT had found the transactions of Long Term Capital Gain by the assessee to be bogus, his direction to the Assessing Officer to verify the same was incongruent with his aforesaid findings and, therefore, the order passed was bad in law. Again, we do not find any merit in this contention since we have not found any categorical finding of the Ld. PCIT to the effect that the transaction of Long Term Capital Gains earned by the assessee was bogus. What he has only referred to and stated in his entire order is that there was information on record that the transaction was bogus, but at nowhere in the entire order has he held the transaction to be bogus. Therefore, there is no merit in the contention of the Ld. Counsel for the assessee that the Ld. PCIT having found the transaction to be bogus, he could not have asked the Assessing Officer to verify the same. On the contrary, we find the order passed by the Ld. PCIT to be correct since he noted the Assessing Officer to have not examined the issue of Long Term Capital Gain claimed by the assessee as exempt in the light of information available on record that the transaction was bogus and, therefore, he had rightfully set aside the assessment order and directed the Assessing Officer to do the needful on the issue.
In view of the above, all grounds raised by the assessee have been dealt with by us and dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 20.06.2025 at New Delhi.