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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
Appellant by Shri Ram Gilda, A.R. Respondent by Smt. Ashima Gupta, D.R. Date of Hearing: 19.11.2019 Date of Pronouncement: 29.11.2019 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the Ld. Pr. CIT-2, Indore dated 29.3.2019 pertaining to the assessment year 2014-15. The assessee has raised following grounds of appeal:
That the learned PCIT-2 has passed the order u/s 263 of the Act without considering the facts and circumstances of the case properly.
That the order passed u/s 263 of the Act is illegal, wrong, and bad in law. 3. That setting aside of assessment order u/s 263 of the Act for re- enquiry and re-verification of the claim of long term capital gain is illegal, wrong and bad in law. 4. That the appellant craves leave to add, amend and/or withdraw any grounds of appeal on or before the hearing of appeal.
2. The only effective ground is against invoking the provisions of section 263 of the Act, thereby revising the concluded assessment. The facts in brief are that case of the assessee was picked up for scrutiny assessment under the CASS and assessment was framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) vide order dated 20.12.2016. The A.O. while framing the assessment made addition of Rs.9,57,454/- on account of surrender by the assessee its claim of exemption u/s 10(38) of the Act. Subsequently, Ld. Pr. CIT issued a notice u/s 263 of the Act dated 18.7.2018 calling upon the assessee as to why the assessment should not be revised. The basis of the issue of notice as stated in the impugned order was that as per the information available on records, it was noted that the assessee had claimed exemption u/s 10(38) of the Act. The A.O. only disallowed the exemption 2 claimed u/s 10(38) of the Act but did not treat income from other sources as undisclosed income u/s 68 of the Act and chargeable to tax u/s 115BBE of the Act. It was observed by the Ld. CIT that the A.O. ought to have investigated and examined this aspect before making the assessment and no enquiry about the company whose shares have been purchased and sold, no investigation was made regarding broker or method of purchase and sale. In response to the notice, the assessee filed a detailed reply, however, the reply of the assessee was not accepted by the Ld. Pr. CIT and he proceeded to revise the assessment order. Thus, the Ld. CIT after considering the material on record came to the conclusion that the assessment dated 20.12.2016 for the assessment year 2014-15 is erroneous in so far as it is also prejudicial to the interest of the revenue on account of passing the order without making required enquiries/investigations.
Aggrieved against this, the assessee is in present appeal. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. For the sake of clarify, submissions of the assessee are reproduced as under: 3
Ld. Counsel for the assessee vehemently argued that the Ld. Pr. CIT is not justified in invoking the provisions of section 263 of the Act as the A.O. has made requisite enquiries. He further submitted that specific query has been raised as reply by the assessee. He drew our attention to the assessment order to buttress his contention. Further, he relied upon the decision of the coordinate bench rendered in the case of Miss Asha Luthra Vs. ITO in dated 28.6.2019. The Ld. Counsel for the assessee placed reliance on the decision of SMC Bench of the Tribunal in ITA No.3835/Del/2018. Ld. Counsel also placed reliance on the judgement of the Hon'ble Supreme Court rendered in the case of Malabar Industrial Company Ltd. Vs. CIT. In support of this written synopsis and submissions made at bar, Ld. D.R. opposed these submissions and supported the order of the Ld. Pr. CIT. Ld. CIT(DR) vehemently argued that the A.O. has not made any enquiry regarding the companies of which the shares were transacted and also the broker.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. Ld. Counsel for the assessee vehemently argued that exercise of powers u/s 263 of the Act by the Ld. Pr. CIT is undisputed, illegal and contrary to the settled principles of law. In the present case, undisputed fact remains that the assessee had claimed exemption u/s 10(38) of the Act. It is stated that during the assessment proceedings, claim of exemption was withdrawn and the A.O. taxed the surplus arising out of the transaction as long term capital gain. Hence, he made addition to the declared income in respect of the long term capital gains. However, the Ld. CIT revised the assessment order on the ground that the A.O. did not make necessary enquiry to verify the genuineness of the transaction. In the opinion of the Ld. Pr. CIT, the investment made in the transaction would have been taxed as unexplained investment, which was required to be added u/s 68 of the Act and chargeable to tax u/s 115BBE of the Act. It is contended by the Ld. Counsel for the assessee that the A.O. has taken one of the plausible view. Therefore, Ld. Pr.
CIT is not justified in exercising jurisdiction u/s 263 of the Act. Ld. Counsel for the assessee has relied upon various case laws in support of his contention to buttress the argument that the investment made in the share of company namely Turbo Tek Engineering Ltd. has been treated as the genuine transaction by the coordinate bench of the Tribunal in the case of Miss Asha Luthra Vs. ITO in ITA No.6483/Del/2017. Ld. Counsel for the assessee also placed reliance on the decision of the SMC bench of this Tribunal in the case of Sikha Dhawan Vs. ITO and Sri Lali Kumar Agrawal Vs. ACIT. It is stated that under these facts, the A.O. was justified in treating the transaction as long term capital gains. The law is well settled that power conferred u/s 263 of the Act can be exercised where the order is erroneous, so far it is prejudicial to the interest of the revenue. Therefore, there has to be satisfaction of two conditions, firstly, the assessment order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the revenue. In the present case, Ld. Pr. CIT revised assessment on the ground that the A.O. has not carried out any investigation regarding the transactions of sale and purchase of shares of company namely M/s. Turba Tek Engineers. The case of the assessee that the transaction is effected through stock exchange, all related evidences have been filed. There is no adverse material regarding transactions carried out by the assessee. There is no specific finding/statement of any third party against the assessee. It is also stated that name of the assessee nowhere figures in any of the statement. Under these facts, Ld. Pr. CIT was not justified in invoking the provisions of section 263 of the Act. We have given our thoughtful consideration to the facts of the case.
The Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd. (2012) 20 Taxmann.com 587 (Delhi) has examined the law on the issue of initiation of proceedings u/s 263 of the Act. The Hon'ble High Court observed in paras 17 & 18 as under:
“17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged “inadequate investigation”, it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing & Products Camphor Works [1998] 231 ITR 53 / 98 Taxman 1 (SC). Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous.
It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. V. Commissioner of Income Tax, [2000] 243 ITR 83/109 Taxman 66 (SC), had observed that the phrase ‘prejudicial to the interest of Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue.”
Since the A.O. has treated the transaction as long term capital gain, therefore, in light of the judgement of the Hon'ble Delhi High Court, Ld. Pr. CIT should have brought some material rebutting the view adopted by the A.O., which has not been done. The issue is simply restored to the A.O. for making enquiry. For this reason, action of the Ld. CIT cannot be sustained. Hence, grounds raised in the appeal are allowed. The impugned order is quashed.
In the result, the appeal filed by the assessee is allowed.
Order was pronounced in the open court on 29 .11.2019.