KESARI NANDAN TIE UP (P) LTD,KOLKATA vs. PCIT-2, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER

ITA No.429/KOL/2020 Assessment Year: 2015-16

Kesari Nandan Tie Up Pvt. Ltd. Vs. PCIT-2, Kolkata 22, Brabourne Road, 1st Floor, Kolkata-700001 [PAN: AADCK5292N] APPELLANT RESPONDENT

Appellant by : None Respondent by : Shri Subhendu Datta, CIT DR

Date of hearing : 16.06.2026 Date of Pronouncement : 19.06.2026 O R D E R PER YOGESH KUMAR U.S., JUDICIAL MEMBER This Appeal is filed by the Assessee against the order of the Principal Commissioner of Income Tax-2, Kolkata [“the Ld. PCIT”, for short], dated 29.05.2020 passed u/s 263 of the Income Tax Act, 1961 (“the Act”, for short) for the assessment year 2015-16. 2. Brief facts of the case are that, the case of the Assessee was selected for scrutiny on the basis of information received from Investigation Directorate regarding “Bogus LTCG/STCL”. Subsequently, notices issued u/s 143(2) and 142(1) of the Act were

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 issued and an Assessment Order came to be passed u/s 143(3) of the Act on 23.08.2017 by accepting the return. The Ld. PCIT-2, Kolkata by invoking the provisions of section 263 of the Act, restored the issue to the file of the Assessing Officer to re-assess the income of the Assessee for the year under consideration. Aggrieved by the Order of the PCIT-2, Kolkata dated 29.05.2020, Assessee preferred the captioned Appeal.

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 6.2 On perusal of the assessment order, it is seen that, the AO has simply accepted the submission of the assessee without cross verifying the information received from investigation wing vis-a-vis the submission filed by the assessee. Therefore, the AO has failed to ask for explanation in respect of bogus LTCG & STCG to the tune of Rs.3.900/- & Rs.24,49,082/-respectively vis a vis the declaration of Rs.12,00,000/- declared in IDS 2016. In this regard, the assessee has also not given any explanation in response to show cause, for explanation in respect of bogus LTCG & STCG to the tune of Rs.3,900/- & Rs.24.49.082/- respectively. Therefore, the assessment order passed by the AO is erroneous and prejudicial to interest of the revenue to the extent of the differential amount, since the AO has failed to reconcile at the time of assessment proceedings. However, if the assessee is able to reconcile the differential amount before the AO, then no further action is required by the AO, In this regard, reliance is placed in the case of CIT vs. Anand Kumar Jain reported in 231 Taxman 534(All) order dated 03.11.2014 relying on the ratio laid down by SC in Malabar Industrail Co Ltd. (109 Taxman 66) has held that order passed by AO without applying his mind to the material available on record is erroneous and such order can be revisioned u/s 263 of the Act. Therefore, the assessment order passed by the AO appears to be erroneous and prejudicial to the interest of the revenue. 7. In this context, it may be pertinent to analyze the judicial decision on the subject matter of revision u/s 263 of the Act in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83(SC) where in the Hon'ble Apex Court discussed the scope of Section 263 and held as follows:- “......The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-- recourse cannot be had to Section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. 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.

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 The phrase prejudicial to the interests of the revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. vs. S.P. Jain and Another [31 ITR 872], the High Court of Karnataka in Commissioner of Income-tax, Mysore vs. T. Narayana Pai [98 ITR 422], the High Court of Bombay in Commissioner of Income-tax vs.Gabriel India Ltd. [203 ITR 108] and the High Court of Gujarat in Commissioner of Income-tax vs. Smt. Minalben S. Parikh [215 ITR 81] treated loss of tax as prejudicial to the interests of the revenue." 8. While the Hon'ble Delhi High Court in the case of GEE VEE Enterprises vs. AddI CIT reported in 99 ITR 375 (Del) has held that the CIT may consider the order of the Assessing Officer to be erroneous not only if it contain some apparent error of reasoning or of law or of fact on the face of it but also because the Assessing Officer has failed to make enquiries which are called for in the circumstances of the case and it is an order which simply accepted what the assessee has stated in his return of income on the said issue. The Commissioner can regard the order erroneous on the ground that the AO should have made further enquiries. Further, it has been held that the Assessing Officer 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 for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the ITO to further investigate the facts stated in the return when circumstances would make such inquiry. 9. Babulal S Solanki [TS-144-ITAT-2019(Ahd)] order dated 4.3.2019. Conclusion:- Ahmedabad ITAT dismisses assessee-individual's appeal for AY 2012-13, upholds Commissioner's sec.263-order holding lack of investigation/enquiry by AO in examining assessee's claim of considering the sale consideration as per agreement (which was substantially lower) instead of stamp duty valuation (jantri value) as per sec. Observing that the AO in his letter, did seek an explanation from the assessee in 'general terms' for adoption of sale consideration as against stamp duty valuation, holds that there was neither any specific reference to the facts of the case nor application of sec.50 further relying on Delhi HC judgment in case of Gee Vee Enterprises and SC ruling in Malabar Industrial Co. Ltd., opines that, even if the matter was examined by the AO and it was a conscious call of the AO to accept the plea of the Page | 4

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 assessee, it would not take the matter outside the ambit of Section 263. Thereafter, ITAT placed reliance on Delhi HC decision in case of Gee Vee Enterprises Gee Vee Enterprises [TS-5-HC-1974 (DEL)] which had held that the order by the AO was erroneous even if no inquiry was conducted by him. Thereby the ITAT ruled that the explanation given by the assessee in the present case was not a legally possible view. Next, ITAT also placed reliance on SC judgment rendered in case of Malabar Industrial Co. Ltd. [TS-6- SC-2000] where it was observed that. "where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. Thus by relying on this judgment, ITAT took the view that the contentions of the assessee were unsustainable in law. Thereby ITAT remarked, "Therefore, even if the matter was examined by the Assessing Officer and it was a conscious call of the Assessing Officer to accept the ples of the assessee. such a situation would not take the matter outside the ambit of Section 263 as the view adopted by the Assessing Officer was clearly unsustainable in law Having said that, we must add that there can be other legal reasons for grant of relief on merits, and that area is not yet explored by. or before, us. Thus, ITAT upheld the revisionary order passed by the Commissioner and held that the AO must take a call on the merits of the matter, without being influenced by the observations of the ITAT. 10. Hon'ble Karnataka in the case of Thalibai F. Jain vs. ITO 101 ITR 1. 6 (Karn) has held that where no enquiries made by the Assessing Officer on the relevant issue, assessment must be held to be prejudicial to the interest of the revenue and what is prejudicial to the interest of the revenue must be held to be erroneous though the converse may not always be true. 11. In this regard, it is mentioned that mere non enquiry would also render a particular order passed by lower authority as erroneous and prejudicial to the interests of revenue. This position has been clearly confirmed by Hon'ble Supreme Court in the case of Rampyari Devi Sarogi v. CIT(1968) 67 ITR 84 & Smt. Tara Devi Aggarwal v. CIT (1973) 88 ITR 323 (SC). The reasoning for this proposition has been explained by Hon'ble Delhi High Court in the case of Gee Vee Enterprise v. Addl.CIT(1975) 99 ITR 375. 12. Further to this it is noticed that there is no appeal right available to the Revenue from the order of assessment passed by the AO and i.e. why revisionary powers have been given to the Commissioner and such Page | 5

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 power were held to be wide amplitude by the Hon'ble Supreme Court in the case of CIT v. Shree Manjunathesware Packing Products & Camphor Works (1998) 231 ITR 53 & 96 Taxman 1. Therefore, normally when AO has not made any enquiry on a particular issue. then such order in view of the above detailed discussion has to be construed as erroneous and prejudicial to the interest of revenue and therefore, the impugned assessment order is erroneous and prejudicial to the interest of Revenue as AO has failed to make any enquiry. 13. CIT vs. Bhagwan Das (2005) 272 ITR 367(AII) (HC), the HC held that non-application of mind by the AO was prejudicial to the interest of the revenue. 14. Bharat Overseas Bank Ltd vs. CIT (2013) 152 TTJ 546 (Chennai) (Trib) When the order of the AO was silent on the claim made by assessee, and allowed such claim, without discussion, it was held that such an order was erroneous and prejudicial to the interest of revenue. (In the case of the appellant is was selected the case for scrutiny only on account of sale and transfer of land to Nrimal, therefore, the AO should have given reasons-whether transfer, or capital gain or not) 15. Amibka Agro Suppliers vs. ITO (2005) 95 ITD 326 (Pune) Wherein held that acceptance of explanations offered by the assessee without any enquiry renders the assessment order erroneous as well as prejudicial to the interest of revenue. 16. Further, as can be seen from 263 order, assessment was made without active and conscious examination of relevant facts and issues will render an assessment erroneous within the meaning of section 263 and some case laws are as below: Smt. Seema Hemant Shirali vs. ITO 141 TTJ 351(Pune) Ranka Jewellers vs. AddI.CIT 36 SOT 11(Pune) Amibka Agro Suppliers vs. ITO (2005) 95 ITD 326(Pune) 17. It may be further noticed that in order to provide clarity on the issue of 'erroneous in so far as it is prejudicial to the interest of the revenue", a new Explanation has been inserted to clarify 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;,

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 1. The order is passed allowing any relief without inquiring into the claim; 2. 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. This amendment takes effect from 1-6-2015 18 Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Supreme Court, High Court and ITAT, and in accordance with the amendment made to Section 263 of the 'Act' with effect from 01.06.2015, I hold that the impugned assessment order dated 23/08/2017 passed by the A.O. is erroneous in so far as it is prejudicial to the interests of revenue. Therefore, after giving the assessee an opportunity of being heard, the impugned assessment order dated 23/08/2017 is restored back to the AO for making a fresh order adjudicating with the directions given in this order separately. 19. Accordingly, in view of the facts and circumstances of the case as stated above and also respectfully following the judgments cited above, I am of the considered view that, it is deemed fit and appropriate in the interest of justice to restore the file back to the A. O with a direction to the AD to verify the issue as discussed in Para 3 & Para 6 above afresh, after giving opportunity to the assessee. Accordingly, I direct the AO to re-assess the income of the assessee for the relevant AY-2015-16 on the issues as discussed supra Order u/s 263 of the Act is passed accordingly. 6. Since the Assessee has not appeared and made any submission in order to contradict the findings of the Ld. PCIT-2, Kolkata, we find no reason to interfere with the findings and the conclusion of the Ld. PCIT-2, Kolkata. Accordingly, we find no merit in the Appeal of the Assessee.

ITA No.429/Kol/2020 Kesari Nandan Tie up Private Limited.; A.Y: 2015-16 7. In the result, Appeal of the Assessee is dismissed. Order pronounced on 19.06.2026. Sd/- Sd/- (RAKESH MISHRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19.06.2026 DP, PS Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR) //TRUE COPY//

ASSISTANT REGISTRAR KOLKATA BENCHES, KOLKATA