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Income Tax Appellate Tribunal, ‘B’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar
Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Principal Commissioner of Income Tax-15, Kolkata dated 22.06.2020 passed under section 263 of the Income Tax Act, 1961 for the assessment year 2015-16.
The assessee has taken two grounds of appeal, out of which Ground No. 2 is general ground, which does not call for recording off any specific finding.
Under Ground No. 1, the assessee has pleaded that ld. CIT has erred in taking cognizance under section 263 of the Income Tax Act and thereby 1
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setting aside the impugned assessment for framing a denovo assessment order. The Registry has pointed out that the appeal is time barred by 247 days. The assessee has filed an application dated 27.04.2021 pleading therein that the impugned order was passed on 22.06.2020 and the appeal is being filed on 27.04.2021. The period from March, 2020 upto March, 2022 (roughly) has been excluded by the Hon’ble Supreme Court being Covid period for counting for the purpose of limitation. Therefore, the appeal is not to be termed as time-barred. We treat the appeal as filed within limitation.
In response to the notice of hearing, no one has come present. We concluded the hearing on 13th July, 2022 and passed the following order:- “13.07.2022: “The present appeal is directed at the instance of assessee against the order ld. Principal Commissioner of Income Tax-15, Kolkata dated 22.06.2020 passed for A.Y. 2015-16 under section 263 of the Income Tax Act.
This appeal is on the Board since 18.01.2022. It was listed on sixth occasions in the past since January, 2022. Only once Bench did not function. Otherwise on all the dates, appeal of the assessee was called for hearing. Every time Bench gave direction for service of notice to the assessee. On 1st of June, 2022, a Mail was sent to the assessee on the Mail-ID mentioned in Form No. 36. Inspite of all these things, no one has come present on behalf of the assessee. Earlier Shri Rajeeva Kumar, Advocate filed his Power of Attorney and sought adjournment on two occasions, but thereafter he failed to appear. Even for today, he noted the date on 7th June, 2022. We have directed the Bench Clerk to enquire on the Mobile Number given in the Form 36, i.e. 9830234440, but the person who attended the call did not talk responsibly, rather expressed in a manner as if he has no concern with this appeal. He introduced himself as the assessee. Faced with the above situation, we heard the appeal ex-parte qua the assessee with the assistance of ld. CIT(DR) and reserve the order.
Sd/- Sd/- Rajesh Kumar Rajpal Yadav Accountant Member Vice-President (KZ)
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On perusal of the record would reveal that the assessee has filed his return of income on 12.08.2015 declaring total income of Rs.9,38,400/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served. The ld. Assessing Officer has passed the assessment order on 28.12.2017, which is a very brief assessment order. For the facility of reference, we take note of this order, which reads as under:- ITNS - 65 “DEPARTMENT OF INCOME TAX 1. Name of Assessee: SRI KESHAV SARAF 6. Assessment Year: 2015-16 2. Address: Satyanarayan Park,A/C Market, Upper 7. Whether Resident / Resident but not Basement, Shop No.D-120,Kolkata-700007 Ordinarily Resident / Non-resident: Resident. 3. P.A.N./G.I.R. No. : EPLPS7559G 8. Method of Accounting : Mercantile 4. District/Ward/Circle : I.T.O, Ward-45(2), Kolkata 9. Previous Year: 2014-15 5. Status Individual 10. Nature of Business : Civil Contractors j 5(a). If HUF, is higher rate of tax applicable : NA 11. Date(s) of Hearing: As per order sheet. 5(b). If Company, whether: 12. Date of Order: 28.12.2017 5(b)(i). Domestic / Others : 13. Section and Subsection under which the Assessment is made : U/s 143(3) (ii). Public Substantially interested / Public not Substantially interested.: (iii). Industrial / Non-industrial: (iv). Section 108 / Other than Section 108 : ASSESSMENT ORDER The assessee filed his return of income electronically vide acknowledgement No.660924690120815 for the Asst. Year 2015-16 on 12/08/2015 declaring a total income of Rs.9,38,400/-.The return was selected for scrutiny through CASS and notice u/s 143(2) dated 29.07.2016 was issued and served on 16.08.2016. (2) The assessee maintained Bank account with AXIS Bank Ltd. Burrabazar Branch, A/C. No. 914010051273104, (ii) Allahabad Bank , Burrabazar Branch, A/C. No. 20105489403. (3) In response to the notices, Ld. F.C.A. Shri Pawan Kumar Khaitan and A/R (authorised representative) appeared from time to time and represented the case. The assessee filed in reply to the queries as per terms of notice. The submissions and other documents filed at the time of hearing of the case and the same are placed on record. The case was discussed and heard.
ITA No. 156/KOL/2021 Assessment Year : 2015-2016 Keshav Saraf (4) In the light of the discussions made in the foregoing paragraphs, the total income of the assessee for the assessment year 2015-16 and tax liability thereon are computed separately in this order as under:- (5) The Tax liability of the assessee on the above assessed income is calculated in AST modules and is enclosed as Annexure-1. The assessment is made under section 143(3) of the Income Tax Act, 1961 as above. Credit for prepaid taxes is given. Demand Notice of the I.T.Act 1961 is being issued to the assessee along with a copy of the assessment order. Sd/- 28.12.17 Utpal Chakraborty Income Tax Officer: Ward - 45(2kKolkata UTPALCHAKRABORTY Income Tax Officer Ward-45(2). Kol A.O. Code-WBG W 145 2”
The ld. Commissioner called for the assessment record and perused the same. He was of the view that the assessment order is erroneous as much as it is prejudicial to the interest of revenue. Therefore, he issued a show-cause notice to the assessee and the copy of show-cause notice has been reproduced in the impugned order as well as available on the file. We take note of this show-cause notice, which reads as under:- “PRINCIPAL COMMISSIONER OF INCOME TAX - 15, KOLKATA 3, GOVT. PLACE (WEST), GROUND FLOOR, KOLKATA - 700001 No. Pr. CIT - 15/Kolkata/263/2019-20/-3 Date: 25/09/2019 To Shri Keshav Saraf Satyanarayan Park (AC Market) Upper Basement (Shop No.D-120) Kolkata-700007 Sir, Sub: Show cause notice u/s. 263 of the Income Tax Act, 1961 in the case of Keshav Saraf, PAN: EPLPS7559G for A.Y. 2015-16 against the order passed u/s. 143(3) dated 28.12.2017- matter regarding. Please refer to the above. 2. Your assessment record was called for and examined. On going through the assessment records, it is seen that your case was selected for scrutiny in CASS and subsequently assessment order U/s. 143(3) of the IT Act, 1961 was passed by the jurisdictional Assessing Officer on 28.12.2017. 3. On examination of your records, it is seen that during the F.Y-2014-15 you had shown Long Term Capital Gain(LTCG) for an amount of Rs. 44,09,326/- on sale of
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shares of the company Viz. CCL International Ltd. and availed exemption U/s. 10(38) of the IT Act,1961 which was accepted by the AO. 4. I have examined the records and found that the AO has failed to conduct adequate and proper enquiries in your claim of exempted Long Term Capital Gain (LTCG) under section 10(38). In this context, the AO failed to utilize the information from Directorate of Income Tax (Investigation), Kolkata which had unearthed a large economic scam of tax evasion in July 2013 by conducting search and seizure operations on two companies dealing with share transactions. It was found that a cabal of share brokers and entry operators were involved in manipulation of market price of penny stocks listed on BSE in order to provide entries of bogus Long Term Capital Gains to the various stakeholders. Subsequently it had undertaken two surveys (March 2014 & August 2014) which confirmed the earlier findings regarding manipulation of market prices of shares to provide entries of bogus LTCG. During the same period, it had also received a report from DlT(Inv), Delhi which provided inputs on the modus operandi of the LTCG syndicate. Subsequently, DIT(Inv), Kolkata initiated a large scale investigation on a number of entry operators and share brokers providing bogus LTCG entries and identified 84 BSE listed penny stock which had been used for generating bogus LTCG. The Investigation Wing also identified a large number of beneficiaries such as the assesse who had participated in this operation of generating bogus LTCG. D1T (Inv) had furnished corroborating evidences against all the share brokers and the penny stock companies and circulated it along with the detailed report to all the AOs. 5. From the examination of the record, it is observed that the shares of CCL International Ltd on which you earned LTCG of Rs.44,09,326/- Figured in the list of 84 companies which were found to be involved in the scam of generating bogus LTCG. In fact, your case was selected precisely for this reason that you have earned LTCG on penny stock and claimed exemption under section 10(38). 6. The examination of the records shows that the AO has not even kept the DIT(Inv) report in the file, for less studied it to make proper and complete enquiries. The AO has not examined the share brokers and entry operators who were involved in manipulation of the price of the shares. The AO failed to analyze the antecedents and Financial strength of the CCL International Ltd and the abnormal rise in the price of its share in a short period of time i.e. from Rs.91/- per share on 19.12.2013 to 475/- (approx) within a period of little more than one year. The AO failed to enquire into the Balance Sheet and Profit & Loss a/c, EPS, fundamentals of the CCL International Ltd and whether the share of such company can fetch such huge appreciation in the market. The AO has not made enquiries with regard to source of fund of the share broker which was given to the assessee as sales consideration. The AO merely relied on the recital of the documents submitted by the assesse and failed to lift the veil from the tax evasion operations in which the assesse participated. 7. Considering the facts and circumstances of the case, it is considered that the order passed u/s. 143(3) of the IT Act, 1961 dt. 28.12.2017 accepting the LTCG as genuine is erroneous and prejudicial to the interest of revenue. 8. You are, therefore, requested to appear personally or through your authorized representative before the undersigned on 11.10.2019 at 4 p.m. along with your written submission, if any, to show cause as to why the assessment made u/s. 143(3) on 28.12.2017 should not be revised u/s. 263 of the IT Act, 1961.
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Yours sincerely, Sd/- NAVEEN CHANDRA Principal Commissioner of Income TAX-15, Kolkata”
In response to the show-cause notice, the assessee has filed written submissions vide letters dated 15.10.2019 and 28.11.2019. Thereafter Shri Pawan Khaitan, FCA appeared on behalf of the assessee. The ld. Commissioner has summarised the submissions of the assessee and took note of them on pages no. 4 & 5 of the impugned order. Thereafter ld. Commissioner has set aside the assessment order by recording the following finding:- “7. I have duly considered the provisions of law, the facts of the case, the submissions of the assessee and perused the assessment records.The written submissions dated 15/10/2019 & 28/11/2019 submitted on behalf of the assessee have been carefully considered. Each of his objections raised is dealt with here under: 8. The first objection of the assessee was that the A.O. has accepted the claim of long term capital gains made by the assessee after collecting relevant evidence with regard to purchase and sale of such shares and after making proper and independent enquiry from the Broker. Hence, there was no “error” in such order, nor such order can be qualified as “prejudicial to the interest of revenue”. Hence, the impugned assessment order is not amenable to revision u/s. 263 of I.T. Act, 1961. There is no truth in such claim of the assessee, as would be evident from the sequence of facts and circumstances narrated in later paras. The fact 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.44,09,326/- 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. The AO has failed to utilize the evidence furnished by the Investigation Wing of the Department.
9.1. In the instant case, the Assessing Officer not only did not utilize but also did not even 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)A/Vol.lIl/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 A.Os had been informed 6
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about the investigation conducted by Kolkata 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 A.Os 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 A.O. 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 share broker Baljit Securities Pvt. Ltd. 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. 44,09,326/-, 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.
9.2 .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. 91/- per share in December, 2013 to an average of Rs. 475/- per share in December, 2014 / January, 2015. A mere perusal of the performance, as below, of the company whose share value jumped from Rs 91 to Rs 475 in one year as should raise any investigator’s investigative skills but the AO totally ignored all the evidences lying before him. CCL International Ltd F.Y. 2012-13 F.Y. 2013-14 F.Y. 2014-15 A.Y. 2013-14 A.Y. 2014-15 A.Y. 2015-16 19.19 Cr. 19.19 Cr. 19.19 Cr. Equity share capital 77.29 Cr. 79.60 Cr. 94.34 Cr. Sales during the year 1.74 Cr. 0.99 Cr. 1.02 Cr. Profit/Loss during the year 0.18 paisa 0.10 paisa 0.11 paisa | Earning per share (Rs) 0.05 aisa NIL Equity Dividend (%) 0.05 paisa (2.5%)
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 7
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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 heldthat 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 have 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.0. 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.
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. ” 11. In the light of the above discussion, the Ld. A.R’s submission that the A.O. had conducted all relevant enquiry in the case before accepting the assessee's claim in this regard is factually incorrect. Therefore, his order is amenable to revision u/s. 263 of the Act, as per clause (a) of Explanation -2 to section 263 of the Act. The said Explanation -2 reads 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
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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. 12. The Id. A/R’s further submission that none of the conditions set out under clauses (a) to (d) of Explanation-2 to section 263 stands satisfied in the instant case, warranting initiation of revisionary proceedings, has no merit in the same. From a reading of Explanation-2 to section 263 reproduced above, it is evident that the assessee’s case is covered by its Clause-(a), as the A.O. passed the order without bringing the adverse evidence available against the assessee on record by way of statements of various entry operators who were engaged in laundering black money of the assessees by artificially rigging the prices of select penny stocks to generate bogus tax free Long Term Capital Gains and for his failure to confront the same to the assessee. Even, in the course of proceedings u/s 263, the assessee did not furnish any explanation when it was confronted with statement of brokers who had admitted rigging the share price. 13. The next allegation of the assessee is that on perusal of the show cause notice issued u/s. 263 of the Act, it does not appear that the records were called for and examined by the undersigned. This allegation is without any basis since at para-2, 4, 5 & 6 of the show cause notice supra, the Pr. CIT has clearly mentioned that he had called for and examined the assessment record and other records including the report of the Directorate of Income Tax (Inv.), Kolkata as well as EFS Instruction No. 53 issued by DIT (Systems) vide letter No. F. No. 1/11 /ClB/Soft/94- DIT(S)A/ol.lIl/Part/ dated 08.03.2016. The Pr.CIT also took note of letter No. F. No. 287/30/2014-IT(lnv.ll)-Vol-lll dated 16.03.2016 (enclosed as ‘Annexure-1’ to this order), issued by the Deputy Secretary (Inv. II), CBDT, whereby the A.Os. had been informed about the investigation conducted by Kolkata 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. Against this overwhelming evidence, the assessee’s claim that the records were not called for and examined by the Pr. CIT before issue of show cause notice, is wholly untrue. 14. The Ld. A.R. has based his defense mainly on the ground that the A.O.’s order could have been held erroneous and prejudicial to the interest of the Revenue only if the A.O. had not carried out any enquiry. But the A.O. had written to the share broker M/s. Baljit Securities Pvt. Ltd. to confirm the claim of purchase and sale of shares of CCL International Ltd. by the assessee. Hence, it cannot be held to be a case of “no enquiry”. The revenue’s case however, is not that no enquiry was made in the case, but the A.O. had failed to conduct “adequate” and “proper” enquiry which the facts and circumstances of the case demanded in the light of inputs from 9
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the Investigation Wing, Kolkata. No doubt the assessee has relied upon a few judgments of the Hon’ble Kolkata Tribunal. However, those decision have been rendered without considering the ratio of the Apex Court’s judgement rendered in the case of Suman Poddar reported in (2019) 112 Taxmann.com 330 (SC) and are, therefore, per in curium. The Supreme Court in the case of Suman Poddar categorically held that exemption u/s 10(38) cannot be allowed because share transaction were bogus as Company whose shares were allegedly purchased was penny stock. 15. The AO’s failure to act diligently and with investigative skills expected of an assessing officer, becomes at once evident from the fact that he had similar other cases in his ward where such tax evasion was being taking place in an organized manner. The AO had information from the Investigation Wing of the Income Tax Department of such organized tax evasion methods being adopted. He also had several such cases in his ward where tax evasion was taking place by adopting the same modus operandi, in penny stocks already identified by the Investigation Wing. A List of such cases is attached as Annexure 2 where revisional action u/s 263 has been taken separately on the same ground. 16. From the examination of all the materials on record and careful appreciation of the facts and circumstances of the case, I find that the AO has passed the assessment order in an adhoc and perfunctory manner, leaving out issues which had a material bearing on assessing the correct income of the tax payer. On the whole, the AO had not performed his job in the right spirit and has passed the assessment order in a manner which shows lack of application of mind, failure to conduct due diligence and to apply the correct provisions of law before passing the order. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order u/s 143(3) dated 28.12.2017 passed by the A.O., is erroneous in so far as it is prejudicial to the interest of revenue within the meaning of section 263(1) and its explanation 2(a) of the I.T. Act, 1961. In law also the order u/s 143(3) is not in accordance with the law as propounded by the Supreme Court in the case of Suman Poddar reported in (2019) 112 Taxmann.com 330 (SC). As a result, the assessment order passed by the A.O. is set aside in respect of the issues discussed above. The A.O. is directed to initiate fresh assessment proceedings & carry out necessary enquiries/verification & provide reasonable opportunity to the assessee to produce documents & evidences which he may choose to rely upon for substantiating his own claim. Thereafter a fresh assessment order may be passed in accordance with the relevant provisions of law. 17. Issue copy of this order to the assessee, the Assessing Officer and the Jt. CIT, Range-43, Kolkata. Sd/- (Naveen Chandra) Pr. Commissioner of Income Tax-15, Kolkata”.
With the assistance of ld. CIT(DR), we have gone through the record carefully. Before we embark upon an inquiry on the facts and
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circumstances of this case, we deem it appropriate to keep in mind the scope of Section 263. “263(1) The 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 interest of the revenue, 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. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) “record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub- section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has
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been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.”
A bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon’ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT
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taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.
Apart from the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto
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reported in 227 CTR 113 and Gee Vee Enterprises Ltd vs. Addl. Commissioner of Income Tax (99 ITR 375). In the case of Sun Beam Auto, the Hon'ble High Court has pointed out a distinction between lack of inquiry and inadequate inquiry. If there is a lack of enquiry, then the assessment order can be branded as erroneous. The following observations of the Hon'ble Delhi High Court are worth to note:
“12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open”. 11. In the case of Gee Vee Enterprise vs. Commissioner of Income Tax reported in 99 ITR page 375, the Hon’ble court has expounded the approach of ld. Assessing Officer while passing assessment order. The observation of the Hon’ble court on pages 386 of journal read as under:-
“…it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return.
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The reason is obvious. The position and function of the Income-tax Officer is very diffident from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only on adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but called 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 Income-tax Officer to further investigate the facts stated in the return when circumstances would made such an inquiry prudent that the word ‘erroneous’ in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.”
In the light of above, let us examine the facts and circumstances of the case. A perusal of the record would indicate that the assessee had purchased 4,500 numbers of shares of M/s. CCL International Limited through Baljit Securities Pvt. Limited. These shares were purchased for a consideration of Rs.91/- per share. Similarly he has purchased 7,000 numbers of shares of M/s. CCL International Limited on 19.1.2.2013 from M/s. Comfort Dealcom Pvt. Limited again @ Rs.91/- per share. Within a very short span of time, i.e. one month and three days, these shares were dematerialised and sold @ Rs.476/- per share. The case of the revenue is that there is a substantial rise of the price in a very short span of time. More particularly during investigation, it came to the notice of revenue that a large number of assessees were indulged in availing long-term capital gain benefit from sale of CCL International Limited shares.
Thus if we visualize the speaking order passed by the ld. Commissioner, vis-a-vis a non-speaking order of the ld. Assessing Officer, then it is to be construed that no enquiry was made by the ld. Assessing Officer. The stand of the assessee in his submissions noticed by the ld. Pr. CIT would show that most of the grounds taken by him relates to
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procedural aspects for invoking Section 263 of the Income Tax Act. The assessee also relied on the orders of ITAT, where additions were deleted under similar type of share transactions. However, we find that the assessee neither filed any paper book before us nor submitted specific material. Apart from this observation, we find that the ld. Assessing Officer has not made any enquiry before accepting the claim of the assessee. When a phenomenal increase of the share price taken place in a very short span of time, i.e. within one or two months, then it is necessary to find out genuineness of such claim. It is also pertinent to note that the share price rose to roughly five times of the purchase price within a short span of 1-2 months. This fact is to be further appreciated in the light of various investigations carried out by the Revenue Department on certain share brokers with regard to whom Department has observed that they indulged in providing bogus entries to the public at large. Considering all these aspects, we do not find any error in the order of ld. Pr. CIT. The assessee will get one more chance before the ld. Assessing Officer. The ld. Pr. CIT has just remitted the issue back to the file of the ld. Assessing Officer for fresh investigation. Hence, we are of the view that the appeal is devoid of any merit, accordingly dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on August 25, 2022.
Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 25 day of August, 2022 Copies to : (1) Keshav Saraf, Satyanarayan Park, A.C. Market, Upper Basement, D-120, 141, Cotton Street, Kolkata-700007
(2) Income Tax Officer, Ward-43(6), Kolkata, 3, Government Place (West), Kolkata-700001
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(3) Principal Commissioner of Income Tax-15, Kolkata, (4) The Departmental Representative (5) Guard File