HILL QUEEN INVESTMENT PVT. LTD,KOLKATA vs. PCIT-2, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Hon’ble Accountant Member & Sri Aby T. Varkey, Hon’ble Judicial Member) ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd...……………………....................................……………..…….............Appellant Surobala Apartments Flat No. 202 3rd Floor Block-B Rekhjuani, Bhatinda Rajarhat Kolkata – 700 135 [PAN : AAACJ 2324 P] Vs. Pr. Commissioner of Income Tax -2, Kolkata..................…………...............................…......Respondent Appearances by: Shri S.M. Surana, Advocate, appeared on behalf of the assessee. Shri Devi Sharan Singh, CIT, D/R, appearing on behalf of the Revenue. Date of concluding the hearing : April 6th, 2021 Date of pronouncing the order : April 21st, 2021 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Principal Commissioner of Income Tax (Appeals) - 2, (hereinafter the “ld. CIT(A)”), passed u/s. 263 of the Income Tax Act, 1961 (the ‘Act’), dt. 20/03/2020, for the Assessment Year 2015-16. 2. There is a delay of 223 (two hundred twenty three) days in filing of this appeal by the assessee. After perusing the petition for condonation for delay, we are convinced that the assessee was prevented by sufficient cause in filing the appeal in time. Hence, we condone the delay and admit the appeal. 3. The assessee is a company and filed its return of income for the Assessment Year 2015-16, disclosing total income of Rs.20,40,470/- on 28/09/2015. The case was selected for limited scrutiny for the following reasons:- “(i) Mismatch in sales turnover reported in Audit Report and ITR (ii) Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR (iii) Suspicious sale transaction in shares (Penny Stock tab in ITS)”

2 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. 3.1. The assessment was completed u/s 143(3) The assessment was completed u/s 143(3) on 29/12/2017, determining the total , determining the total income of the assessee company at Rs.20,65,790/ income of the assessee company at Rs.20,65,790/-. The ld. Pr. CIT, Kolkata, issued a show . The ld. Pr. CIT, Kolkata, issued a show- cause notice to the assessee on 07/01/2020, proposing to revise the assessment order cause notice to the assessee on 07/01/2020, proposing to revise the assessment order cause notice to the assessee on 07/01/2020, proposing to revise the assessment order passed u/s 143(3) of the Act, passed on 29/1 passed u/s 143(3) of the Act, passed on 29/12/2017 by invoking his powers u/s 263 of 2/2017 by invoking his powers u/s 263 of the Act. The showcause notice is at page 2 & 3 of the assessment order. The assessee the Act. The showcause notice is at page 2 & 3 of the assessment order. The assessee the Act. The showcause notice is at page 2 & 3 of the assessment order. The assessee replied to the showcause notice. After considering the reply, the ld. Pr. CIT, at para 6 of his replied to the showcause notice. After considering the reply, the ld. Pr. CIT, at para 6 of his replied to the showcause notice. After considering the reply, the ld. Pr. CIT, at para 6 of his order, held as follows:-

“6. I have carefully considered the facts of the case and gone through the submission of e carefully considered the facts of the case and gone through the submission of e carefully considered the facts of the case and gone through the submission of the assessee. On perusal of the assessment record, it is seen that, the assessee company the assessee. On perusal of the assessment record, it is seen that, the assessee company the assessee. On perusal of the assessment record, it is seen that, the assessee company had claimed loss of Rs.73,22,956/ had claimed loss of Rs.73,22,956/- on account of sale transaction in penny stock shares on account of sale transaction in penny stock shares of M/s. Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd. In this Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd. In this Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd. In this regard, during search & Survey action, Directorate of Investigation, Kolkata, had regard, during search & Survey action, Directorate of Investigation, Kolkata, had regard, during search & Survey action, Directorate of Investigation, Kolkata, had identified the following BSE listed penny stock scrips including M/s.Cressanda identified the following BSE listed penny stock scrips including M/s.Cressanda identified the following BSE listed penny stock scrips including M/s.Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd., which have been used by ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd., which have been used by ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd., which have been used by operators and beneficiaries for generation of bogus Long Term Capital Gain (LTCG) & operators and beneficiaries for generation of bogus Long Term Capital Gain (LTCG) & operators and beneficiaries for generation of bogus Long Term Capital Gain (LTCG) & Short Term Capital Loss (STCL). But, the A.O. made assessment without necessar Short Term Capital Loss (STCL). But, the A.O. made assessment without necessar Short Term Capital Loss (STCL). But, the A.O. made assessment without necessary verification or investigation with regard to suspicious sale transaction in Penn verification or investigation with regard to suspicious sale transaction in Penn verification or investigation with regard to suspicious sale transaction in Penny Stock shares, including M/s.Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi shares, including M/s.Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi shares, including M/s.Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd. On the other hand, the AR of the appellant has stated that, the AO Industries Ltd. On the other hand, the AR of the appellant has stated that, the AO Industries Ltd. On the other hand, the AR of the appellant has stated that, the AO had already verified the issue on penny stock shares at the time of assessment proceedings, already verified the issue on penny stock shares at the time of assessment proceedings, already verified the issue on penny stock shares at the time of assessment proceedings, before finalizing the assessment order, therefore. before finalizing the assessment order, therefore. Proceedings u/s 263 cannot be u/s 263 cannot be invoked.” 3.2. Thereafter, he discussed the Thereafter, he discussed the modus operandi of penny stocks and cer of penny stocks and certain decisions of the Courts and Tribunals and at para 18 and 19, held as follows: of the Courts and Tribunals and at para 18 and 19, held as follows:-

“18. Having regard to the facts and circumstances of the case and in the light of the Having regard to the facts and circumstances of the case and in the light of the 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 aforesaid decisions of Supreme Court, High Court and ITAT, and in accordance with 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 Section 263 of the ‘Act’ with effect from 01.06.2015, I hold that the Section 263 of the ‘Act’ with effect from 01.06.2015, I hold that the impugned assessment order dated 29/12/2017 passed by the A.O. is erroneous in so far as it is mpugned assessment order dated 29/12/2017 passed by the A.O. is erroneous in so far as it is mpugned assessment order dated 29/12/2017 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 prejudicial to the interests of revenue. Therefore, after giving the assessee an opportunity of prejudicial to the interests of revenue. Therefore, after giving the assessee an opportunity of being heard, the impugned assessment order dated 29/12/2017 is rest being heard, the impugned assessment order dated 29/12/2017 is restored back to the AO for ored back to the AO for making a fresh order adjudicating with the directions given in this order separately. making a fresh order adjudicating with the directions given in this order separately. 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 19. Accordingly, in view of the facts and circumstances of the case as stated above, and also 19. Accordingly, in view of the facts and circumstances of the case as stated above, and also respectfully following the judgments cited above, I respectfully following the judgments cited above, I am of the considered view that, it is am of the considered view that, it is deemed fit and appropriate in the interest of justice to restore the file back to and appropriate in the interest of justice to restore the file back to and appropriate in the interest of justice to restore the file back to the AO with a direction to the AO to verify the issue as discussed in direction to the AO to verify the issue as discussed in Para 3 & Para 6 above afresh 6 above afresh, after giving opportunity to the ass giving opportunity to the assessee. Accordingly. I direct the AO to re-assess the income of the assess the income of the assessee for the relevant AY AY-2015-16 on the issues as discussed supra. Order u/s 263 of the Act is passed accordingly. Order u/s 263 of the Act is passed accordingly.”

3 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. 5. The ld. Counsel for the assessee relied on his submission made before the ld. The ld. Counsel for the assessee relied on his submission made before the ld. The ld. Counsel for the assessee relied on his submission made before the ld. PCIT during the course of reply to the show cause notice issued u/s 263 of the Act and PCIT during the course of reply to the show cause notice issued u/s 263 of the Act and PCIT during the course of reply to the show cause notice issued u/s 263 of the Act and also the arguments made before the ld. PCIT. The sum & substance of his arguments are also the arguments made before the ld. PCIT. The sum & substance of his arguments are also the arguments made before the ld. PCIT. The sum & substance of his arguments are that the AO has called for and examined all the documents and evidences the AO has called for and examined all the documents and evidences the AO has called for and examined all the documents and evidences pertaining to the above transaction after due enqiry after due enqiry and has come to a plausible conclusion. and has come to a plausible conclusion. That such conclusion of the AO is supported by number of judicial decisions including that of uch conclusion of the AO is supported by number of judicial decisions including that of uch conclusion of the AO is supported by number of judicial decisions including that of the ITAT. He relied on the decision of co e ITAT. He relied on the decision of co-ordination Bench of ITAT, Kolkata in the case ordination Bench of ITAT, Kolkata in the case of M/s Gitsh Tikmani, HUF & Ors. In ITA Nos. 01 to 04/Kol/2019, ITA No. 05/Kol/2019 & ITA M/s Gitsh Tikmani, HUF & Ors. In ITA Nos. 01 to 04/Kol/2019, ITA No. 05/Kol/2019 & ITA M/s Gitsh Tikmani, HUF & Ors. In ITA Nos. 01 to 04/Kol/2019, ITA No. 05/Kol/2019 & ITA Nos. 13 to 15/Kol/2019 dated 20.09.2019 for AY 2014 Nos. 13 to 15/Kol/2019 dated 20.09.2019 for AY 2014-15 and the decision of Co and the decision of Co-ordinate Bench of ITAT , Kolkata in the case of Bench of ITAT , Kolkata in the case of Kaushal Kishore Bihani in ITA No. 690/Kol/2019 Kaushal Kishore Bihani in ITA No. 690/Kol/2019 dated 19.10.2020 for AY 2014 dated 19.10.2020 for AY 2014-15 and submitted that the issue is squarely covered in the and submitted that the issue is squarely covered in the assessee's favour as the fact those case are identical with the facts of th as the fact those case are identical with the facts of th as the fact those case are identical with the facts of this case. He filed a copy of the order of the Tribunal in the case of copy of the order of the Tribunal in the case of Manish Kumar Baid Vs. ACIT, ITA Nos. Manish Kumar Baid Vs. ACIT, ITA Nos. 1236& 1237/Kol/2017 dated 1236& 1237/Kol/2017 dated 18.08.2017, for the proposition that purchase and sale of , for the proposition that purchase and sale of shares of M/s. Kailash Auto Finance Ltd., cannot be considered as bogus, in the facts and Auto Finance Ltd., cannot be considered as bogus, in the facts and Auto Finance Ltd., cannot be considered as bogus, in the facts and circumstances of the case. Similarly, he relied on the order of the Kolkata ‘C’ Bench of circumstances of the case. Similarly, he relied on the order of the Kolkata ‘C’ Bench of circumstances of the case. Similarly, he relied on the order of the Kolkata ‘C’ Bench of the Tribunal in the case Navneet Agarwal vs. ITO, Ward Navneet Agarwal vs. ITO, Ward-35(3) in ITA No. 2281/Kol/2017, 35(3) in ITA No. 2281/Kol/2017, order dt. 20/07/2018, for the proposition that, purchase and sale of shares in M/s. , for the proposition that, purchase and sale of shares in M/s. , for the proposition that, purchase and sale of shares in M/s. Cressenda Solutions Ltd., cannot be treated as bogus on the facts and circumstances of Cressenda Solutions Ltd., cannot be treated as bogus on the facts and circumstances of Cressenda Solutions Ltd., cannot be treated as bogus on the facts and circumstances of the case. 6. The Ld. DR on the other hand relied on the order of ld. PCIT and submitted that The Ld. DR on the other hand relied on the order of ld. PCIT and submitted that The Ld. DR on the other hand relied on the order of ld. PCIT and submitted that the entire long term capital gain declared by the assessee was a bogus transaction and entire long term capital gain declared by the assessee was a bogus transaction and entire long term capital gain declared by the assessee was a bogus transaction and hence the revision has to be upheld. He submitted that large scale rigging has taken hence the revision has to be upheld. He submitted that large scale rigging has taken hence the revision has to be upheld. He submitted that large scale rigging has taken place, where, fake transactions were declared, bogus transaction were shown and place, where, fake transactions were declared, bogus transaction were shown and place, where, fake transactions were declared, bogus transaction were shown and exemption claimed u/s 10(38) of the Act. He submitted that the AO has not examined n claimed u/s 10(38) of the Act. He submitted that the AO has not examined n claimed u/s 10(38) of the Act. He submitted that the AO has not examined the case from this angle and under such circumstances, the order of the AO is erroneous the case from this angle and under such circumstances, the order of the AO is erroneous the case from this angle and under such circumstances, the order of the AO is erroneous insofar as it is prejudicial to the interest of revenue. insofar as it is prejudicial to the interest of revenue. He relied on explanation (2) to He relied on explanation (2) to Section 263 of the Act and submitted that, the order of the Assessing Officer shall be ion 263 of the Act and submitted that, the order of the Assessing Officer shall be ion 263 of the Act and submitted that, the order of the Assessing Officer shall be deemed to be erroneous, insofar as, it is prejudicial to the interest of the revenue as it deemed to be erroneous, insofar as, it is prejudicial to the interest of the revenue as it deemed to be erroneous, insofar as, it is prejudicial to the interest of the revenue as it was passed allowing relief without enquiring into the was passed allowing relief without enquiring into the facts and without making and without making enquiries or verification which should have been made. He relied on the case uiries or verification which should have been made. He relied on the case uiries or verification which should have been made. He relied on the case-law cited by the ld. Pr. CIT in his order u/s 263 of the Act and submitted that the order be upheld. by the ld. Pr. CIT in his order u/s 263 of the Act and submitted that the order be upheld. by the ld. Pr. CIT in his order u/s 263 of the Act and submitted that the order be upheld.

4 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. 7. We have heard rival contentions. On careful consideration of the facts and We have heard rival contentions. On careful consideration of the facts and We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities rcumstances of the case, perusal of the papers on record, orders of the authorities rcumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows: below as well as case law cited, we hold as follows:- 8. The Assessing Officer during the course of assessment proceedings issued notice The Assessing Officer during the course of assessment proceedings issued notice The Assessing Officer during the course of assessment proceedings issued notice u/s 142(1) of the Act on 10/01/20 u/s 142(1) of the Act on 10/01/2017, along with a questionnaire. He directed the 17, along with a questionnaire. He directed the assessee to furnish the documents and evidences of sale transactions of shares. The assessee to furnish the documents and evidences of sale transactions of shares. The assessee to furnish the documents and evidences of sale transactions of shares. The assessee furnished the copies of contract notes and bills issued by M/s. Fairwealth assessee furnished the copies of contract notes and bills issued by M/s. Fairwealth assessee furnished the copies of contract notes and bills issued by M/s. Fairwealth Securities Ltd. in support of the purcha Securities Ltd. in support of the purchase and sale of these shares, copies of which are se and sale of these shares, copies of which are placed at pages 43 to 75 of the paper book. In fact, this case was selected for scrutiny for placed at pages 43 to 75 of the paper book. In fact, this case was selected for scrutiny for placed at pages 43 to 75 of the paper book. In fact, this case was selected for scrutiny for verification of these suspicious sale suspicious sale transactions of shares. The Assessing Officer, in his he Assessing Officer, in his letter dt. 10/11/2017, called for the following details: called for the following details:- “In continuation of the scrutiny proceedings in progress in your case for the In continuation of the scrutiny proceedings in progress in your case for the In continuation of the scrutiny proceedings in progress in your case for the Assessment Year 2015-16, you are requested to furnish the following information. 16, you are requested to furnish the following information. 16, you are requested to furnish the following information. (i) Please state the mode of acquisition of the scrip Please state the mode of acquisition of the scrip CRESSANDA, KAILASH AUTO & CRESSANDA, KAILASH AUTO & RAJLAXMI. Documents in support of the same may be furnished. Documents in support of the same may be furnished. (ii) Kindly state who looks after your investments in share and mutual funds. Is your Kindly state who looks after your investments in share and mutual funds. Is your Kindly state who looks after your investments in share and mutual funds. Is your consent sought before making decisions related to purchase and sale of shares? consent sought before making decisions related to purchase and sale of shares? consent sought before making decisions related to purchase and sale of shares? (iii) Kindly state the financial rationale behind investment in the scrip Kindly state the financial rationale behind investment in the scrip Kindly state the financial rationale behind investment in the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI. KAILASH AUTO & RAJLAXMI. Did you do any financial and technical analysis while Did you do any financial and technical analysis while trading in this scrip? If so, what sources were referred to? trading in this scrip? If so, what sources were referred to? (iv) Did you earn any dividend out of the Did you earn any dividend out of the scrip CRESSANDA, KAILASH AUTO & CRESSANDA, KAILASH AUTO & RAJLAXMI? (v) Please state the broker/brokers involved in trading of the scrip Please state the broker/brokers involved in trading of the scrip Please state the broker/brokers involved in trading of the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI? KAILASH AUTO & RAJLAXMI? (vi) A report on bogus LTCG through penny stocks at the platform of BSE has been A report on bogus LTCG through penny stocks at the platform of BSE has been A report on bogus LTCG through penny stocks at the platform of BSE has been received by the Investigation Wing received by the Investigation Wing, Kolkata where it is seen that the scrip , Kolkata where it is seen that the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI KAILASH AUTO & RAJLAXMI is used for providing accommodation entry in the form of is used for providing accommodation entry in the form of bogus LTCG in lieu of commission by entry operators and brokers who work in bogus LTCG in lieu of commission by entry operators and brokers who work in bogus LTCG in lieu of commission by entry operators and brokers who work in connivance with each other. In light of this f connivance with each other. In light of this fact, please clarify why the LTCG earned act, please clarify why the LTCG earned through the scrip should not be treated bogus and added back to the income. Also state, through the scrip should not be treated bogus and added back to the income. Also state, through the scrip should not be treated bogus and added back to the income. Also state, why commission paid for such pre why commission paid for such pre-arranged accommodation entry should not be added arranged accommodation entry should not be added by to your total income. by to your total income. Your written reply should reach this office by 15 hould reach this office by 15th November 2017 which shall be taken November 2017 which shall be taken into account while framing your assessment order. In case no response is received, it into account while framing your assessment order. In case no response is received, it into account while framing your assessment order. In case no response is received, it shall be presumed that you do not have anything to say in the matter and your case shall shall be presumed that you do not have anything to say in the matter and your case shall shall be presumed that you do not have anything to say in the matter and your case shall be completed accordingly.” ccordingly.”

5 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd.

8.1. The assessee gave point wise reply on 15/11/2017, copy of which is place from The assessee gave point wise reply on 15/11/2017, copy of which is place from The assessee gave point wise reply on 15/11/2017, copy of which is place from pages 27 to 34 of the paper book pages 27 to 34 of the paper book. For the sake of brevity, this is not reproduced . For the sake of brevity, this is not reproduced. Suffice to say that the transactions were supported by documentary evidences to say that the transactions were supported by documentary evidences to say that the transactions were supported by documentary evidences such as contract notes, bills, bank transactions, payments of STT and the transactions were done on the notes, bills, bank transactions, payments of STT and the transactions were done on the notes, bills, bank transactions, payments of STT and the transactions were done on the platform of the stock exchange. platform of the stock exchange. Thereafter, the assessee relied on a number of case law. relied on a number of case law. After considering all these transactions, the Assessing Officer in his order After considering all these transactions, the Assessing Officer in his order After considering all these transactions, the Assessing Officer in his order dt. 29/12/2017, passed u/s 143(3) of the Act, has come to conclusion that these 29/12/2017, passed u/s 143(3) of the Act, has come to conclusion that these 29/12/2017, passed u/s 143(3) of the Act, has come to conclusion that these transactions are genuine transactions transactions are genuine transactions as he had not found any adve as he had not found any adverse evidence to conclude otherwise. 9. On these facts, the issue is whether the ld. Pr. CIT is correct in invoking his On these facts, the issue is whether the ld. Pr. CIT is correct in invoking his On these facts, the issue is whether the ld. Pr. CIT is correct in invoking his powers u/s 263 of the Act. In our considered view, the Assessing Officer has called for powers u/s 263 of the Act. In our considered view, the Assessing Officer has called for powers u/s 263 of the Act. In our considered view, the Assessing Officer has called for and verified all the details and documents in con and verified all the details and documents in connection to the purchase and sale of the nection to the purchase and sale of the shares in question and after examining the same, has taken a possible view that the shares in question and after examining the same, has taken a possible view that the shares in question and after examining the same, has taken a possible view that the transactions are genuine. This is not a case of non verification or no application of mind. transactions are genuine. This is not a case of non verification or no application of mind. transactions are genuine. This is not a case of non verification or no application of mind. This is not an order passed without maki This is not an order passed without making enquiries or verification, which should have ng enquiries or verification, which should have been made. In fact, a number of a number of decisions of the Tribunal support the view taken by the decisions of the Tribunal support the view taken by the Assessing Officer on the very same issue Assessing Officer on the very same issue on the very same evidences. Hence the on the very same evidences. Hence the Assessing Officer has taken a possible vi Assessing Officer has taken a possible view. 10. This Bench of the Tribunal in the case of This Bench of the Tribunal in the case of Usha Devi Modi vs. ITO in ITA No. Usha Devi Modi vs. ITO in ITA No. 874/Kol/2019; Assessment Year 2014 874/Kol/2019; Assessment Year 2014-15, order dt. 12/01/2021, 15, order dt. 12/01/2021, under similar circumstances, has held as follows: circumstances, has held as follows:-

“5. Rival contentions heard. On a careful consideration of Rival contentions heard. On a careful consideration of the facts and circumstances of the the facts and circumstances of the case, perusal of the papers on record and the case law cited, we hold as follows. case, perusal of the papers on record and the case law cited, we hold as follows. case, perusal of the papers on record and the case law cited, we hold as follows. 6. The AO during the course of assessment proceedings has called for the following details on The AO during the course of assessment proceedings has called for the following details on The AO during the course of assessment proceedings has called for the following details on the above transaction of sale and purchase the above transaction of sale and purchase of share of M/s Surbhi Chemicals and Investment Ltd. of share of M/s Surbhi Chemicals and Investment Ltd. “Details of Investment in Equity Shares during the year under consideration “Details of Investment in Equity Shares during the year under consideration “Details of Investment in Equity Shares during the year under consideration i) Name & address of the company in which investment is made Name & address of the company in which investment is made Name & address of the company in which investment is made ii) Copy of allotment letter Copy of allotment letter iii) Copy of “Contract Note” in respect of quoted shares Copy of “Contract Note” in respect of quoted shares iv) Date of allotment of shares Date of allotment of shares v) No. Of shares No. Of shares vi) Value of shares Value of shares

6 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. vii) Source of payment made for obtaining shares Source of payment made for obtaining shares viii) In this regard, you are also requested to furnish the evidence of Mode of such In this regard, you are also requested to furnish the evidence of Mode of such In this regard, you are also requested to furnish the evidence of Mode of such payment alongwith the details of cheque numbers and the copy of bank statement payment alongwith the details of cheque numbers and the copy of bank statement payment alongwith the details of cheque numbers and the copy of bank statement (FY2013-14) highlighting the relevant entries therein showing the transaction. 14) highlighting the relevant entries therein showing the transaction. 14) highlighting the relevant entries therein showing the transaction. 7. Please furnish Please furnish the following details in respect of Long Term Capital Gain the following details in respect of Long Term Capital Gain i) Name of Scrip Name of Scrip ii) Date of purchase Date of purchase iii) Quantity Quantity iv) Rate v) Mode of payment Mode of payment vi) Date of sale Date of sale vii) Quantity Sold Quantity Sold viii) Rate ix) Date of Sale Date of Sale x) Amount of dividend Amount of dividend xi) STT Paid STT Paid xii) L. T. Cap L. T. Capital Gain xiii) Copy of Brokers “Contract Note” Copy of Brokers “Contract Note” In this regard, you are also requested to furnish the evidence of Mode of such payment In this regard, you are also requested to furnish the evidence of Mode of such payment In this regard, you are also requested to furnish the evidence of Mode of such payment along with the details of cheque numbers and the copy of bank statement (FY 2013 along with the details of cheque numbers and the copy of bank statement (FY 2013 along with the details of cheque numbers and the copy of bank statement (FY 2013-14) highlighting the relevant entries th highlighting the relevant entries therein showing the transaction.” The assessee has furnished all these documents called for and after considering the same the AO The assessee has furnished all these documents called for and after considering the same the AO The assessee has furnished all these documents called for and after considering the same the AO accepted the claim of the assessee exemption u/s 10(38) of the Act as the profits earned from accepted the claim of the assessee exemption u/s 10(38) of the Act as the profits earned from accepted the claim of the assessee exemption u/s 10(38) of the Act as the profits earned from purchase and sale of transfer. N purchase and sale of transfer. Nothing adverse was found by the AO during the course of assessment othing adverse was found by the AO during the course of assessment proceedings. Even the ld. PCIT, except the alleged report of DIT(INV), Kolkata no fresh evidence was proceedings. Even the ld. PCIT, except the alleged report of DIT(INV), Kolkata no fresh evidence was proceedings. Even the ld. PCIT, except the alleged report of DIT(INV), Kolkata no fresh evidence was referred to. This report of DIT(INV), Kolkata vide Note No. 75A/12015 referred to. This report of DIT(INV), Kolkata vide Note No. 75A/12015-161257 dated 27.0 161257 dated 27.04.2015 is not brought on record. The PCIT similarly states that there is a report of the DIT(INV) Kolkata and not brought on record. The PCIT similarly states that there is a report of the DIT(INV) Kolkata and not brought on record. The PCIT similarly states that there is a report of the DIT(INV) Kolkata and hence the assessment order is erronerous. The issue is whether the assessment order so passed is hence the assessment order is erronerous. The issue is whether the assessment order so passed is hence the assessment order is erronerous. The issue is whether the assessment order so passed is erroneous insofar as it is prejudicial to the in erroneous insofar as it is prejudicial to the interest of revenue. This is not the case of lack of enquiry terest of revenue. This is not the case of lack of enquiry as alleged ld. PCIT. In fact enquiry was conducted by the O after obtaining all required details. The as alleged ld. PCIT. In fact enquiry was conducted by the O after obtaining all required details. The as alleged ld. PCIT. In fact enquiry was conducted by the O after obtaining all required details. The ld. PCIT himself said that report of DIT(INV), Kolkata was not before the AO. Thus, the order ld. PCIT himself said that report of DIT(INV), Kolkata was not before the AO. Thus, the order ld. PCIT himself said that report of DIT(INV), Kolkata was not before the AO. Thus, the order passed by the AO by taking into account a document or information which is not before him and based on by the AO by taking into account a document or information which is not before him and based on by the AO by taking into account a document or information which is not before him and based on the enquiry and documents before him in a possible view and the assessment order and cannot be the enquiry and documents before him in a possible view and the assessment order and cannot be the enquiry and documents before him in a possible view and the assessment order and cannot be held to be erroneous insofar as it is prejudicial to t held to be erroneous insofar as it is prejudicial to the interest of the revenue. 7, Relying on the decision of M/s Gitsh Tikmani(HUF) & Ors. Supra under identical facts and Relying on the decision of M/s Gitsh Tikmani(HUF) & Ors. Supra under identical facts and Relying on the decision of M/s Gitsh Tikmani(HUF) & Ors. Supra under identical facts and circumstances the ITAT, has held as follows: circumstances the ITAT, has held as follows: “8. We have given our thoughtful consideration to rival contentions. The sole issue that “8. We have given our thoughtful consideration to rival contentions. The sole issue that “8. We have given our thoughtful consideration to rival contentions. The sole issue that arises for our apt adjudication in facts of instant case is as to whether the PCIT has rightly arises for our apt adjudication in facts of instant case is as to whether the PCIT has rightly arises for our apt adjudication in facts of instant case is as to whether the PCIT has rightly exercised his revision jurisdiction vested u/s 263 or not. There is no d exercised his revision jurisdiction vested u/s 263 or not. There is no d exercised his revision jurisdiction vested u/s 263 or not. There is no dispute that the Assessing Officer accepted the assessee’s LTCG as genuine as per his discussion in the Assessing Officer accepted the assessee’s LTCG as genuine as per his discussion in the Assessing Officer accepted the assessee’s LTCG as genuine as per his discussion in the assessment order that he had verified all necessary facts during the course of scrutiny. assessment order that he had verified all necessary facts during the course of scrutiny. assessment order that he had verified all necessary facts during the course of scrutiny. Suffice to say, the Suffice to say, the same fact very much emerges not only from assessee’s detailed paper sessee’s detailed paper book running into 98 pages but also from the relevant assessment notings forming part of book running into 98 pages but also from the relevant assessment notings forming part of book running into 98 pages but also from the relevant assessment notings forming part of record (supra). This tribunal’s co record (supra). This tribunal’s co-ordinate bench’s decision in case of M/s Saregama India ordinate bench’s decision in case of M/s Saregama India Ltd. vs. CIT-1, Kolkata ITA No.1254/Kol/2014 decided 1, Kolkata ITA No.1254/Kol/2014 decided on 20.09.2017 has reiterated the on 20.09.2017 has reiterated the following settled principles in case of sec. 263 revision jurisdiction: following settled principles in case of sec. 263 revision jurisdiction:- “11. Now we shall discuss the propositions of law as laid down by various courts on “11. Now we shall discuss the propositions of law as laid down by various courts on “11. Now we shall discuss the propositions of law as laid down by various courts on the issue of revisionary jurisdiction of the Commissioner of Inc the issue of revisionary jurisdiction of the Commissioner of Inc the issue of revisionary jurisdiction of the Commissioner of Income Tax u/s 263 of the Act. The Hone’ble Andhra Pradesh High Court in the case of Spectra Shares and the Act. The Hone’ble Andhra Pradesh High Court in the case of Spectra Shares and the Act. The Hone’ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on

7 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. this issue of exercise of jurisdiciton u/s 263 of the Act by the Principal this issue of exercise of jurisdiciton u/s 263 of the Act by the Principal this issue of exercise of jurisdiciton u/s 263 of the Act by the Principal Commissioner of Income Tax and culled out the principles laid down in the ommissioner of Income Tax and culled out the principles laid down in the ommissioner of Income Tax and culled out the principles laid down in the judgments as below: judgments as below: 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of reading of Sec.263 makes it clear that the prerequisite for the exercise of reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is the order of the Income Tax diction by the Commissioner suo motu under it, is the order of the Income Tax diction by the Commissioner suo motu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Commissioner has to be satisfied of twin conditions, namely, (i) the order of 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 ng Officer sought to be revised is erroneous; and (ii) it is prejudicial to the ng Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent interests of the Revenue. If one of them is absent – if the order of the Income Tax if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue is prejudicial to the Revenue – recourse cannot be had to Sec.263 (1) of the recourse cannot be had to Sec.263 (1) of the Act. It also held at pg Act. It also held at pg-88 as follows: "The phrase "prejudicial to the interests of the Revenue" has to be read in "The phrase "prejudicial to the interests of the Revenue" has to be read in "The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Off conjunction with an erroneous order passed by the Assessing Off 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 revenue as a consequence of an order of the Assessing Officer cannot be treated as revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income prejudicial to the interests of the Revenue. For example, when an Income prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in Officer adopted one of the courses permissible in law and it has resulted in Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income Revenue: or where two views are possible and the Income Revenue: or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an one view with which the Commissioner does not agree, it cannot be treated as an 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 erroneous order prejudicial to the interests of the Revenue, unless the view taken erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Income-tax Officer is unsustainable in law. It has been held by this Court tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his that where a sum not earned by a person is assessed as income in his hands on his that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such so offering, the order passed by the Assessing Officer accepting the same as such so offering, the order passed by the Assessing Officer accepting the same as such will be erroneou will be erroneous and prejudicial to the interests of the Revenue. Rampyaridevi s and prejudicial to the interests of the Revenue. Rampyaridevi Saraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) Saraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) Saraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 88 ITR 323 (SC)". 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. (2 Supra (2 Supra) and observed that every loss of Revenue as a consequence of an order of ) and observed that every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the the Assessing Officer cannot be treated as prejudicial to the interests of the the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses Revenue. For example, when an Income Tax Officer adopted one of the courses Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it h permissible in law and it has resulted in loss of revenue; or where two views are as resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the possible and the Income Tax Officer has taken one view with which the possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order Commissioner does not agree, it cannot be treated as an erroneous order Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the vie prejudicial to the interests of the Revenue, unless the view taken by the Income Tax w taken by the Income Tax Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then stood was interpreted by the Assessing Officer but the Revenue contended that in stood was interpreted by the Assessing Officer but the Revenue contended that in stood was interpreted by the Assessing Officer but the Revenue contended that in view of the 2005 Amendment which is clarificatory and retrospecti view of the 2005 Amendment which is clarificatory and retrospecti view of the 2005 Amendment which is clarificatory and retrospective in nature, the view of the Assessing Officer was unsustainable in law and the Commissioner was view of the Assessing Officer was unsustainable in law and the Commissioner was view of the Assessing Officer was unsustainable in law and the Commissioner was correct in invoking Sec.263. But the Supreme Court rejected the said contention correct in invoking Sec.263. But the Supreme Court rejected the said contention correct in invoking Sec.263. But the Supreme Court rejected the said contention and held that when the Commissioner passed his order disagreeing with the view and held that when the Commissioner passed his order disagreeing with the view and held that when the Commissioner passed his order disagreeing with the view of the Assessing Officer, there were two views on the word "profits" in that section; of the Assessing Officer, there were two views on the word "profits" in that section; of the Assessing Officer, there were two views on the word "profits" in that section; that the said section was amended eleven times; that different views existed on the that the said section was amended eleven times; that different views existed on the that the said section was amended eleven times; that different views existed on the day when the Commissioner passed his order; that the mechanics of the section day when the Commissioner passed his order; that the mechanics of the section day when the Commissioner passed his order; that the mechanics of the section had become so complicated over the years that two views were inherently possible; ome so complicated over the years that two views were inherently possible; ome so complicated over the years that two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospective will and therefore, the subsequent amendment in 2005 even though retrospective will and therefore, the subsequent amendment in 2005 even though retrospective will not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi High Court held that High Court held that the power of suo motu revision exercisable by the the power of suo motu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an Commissioner under the provisions of Sec.263 is supervisory in nature; that an Commissioner under the provisions of Sec.263 is supervisory in nature; that an "erroneous judgment" means one which is not in accordance with law; that if an "erroneous judgment" means one which is not in accordance with law; that if an "erroneous judgment" means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law Income Tax Officer acting in accordance with law makes a certain assessment, the makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, same cannot be branded as "erroneous" by the Commissioner simply because, same cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should have been written differently or more according to him, the order should have been written differently or more according to him, the order should have been written differently or more elaborately; that the section does not visualize the substitution of the jud elaborately; that the section does not visualize the substitution of the jud elaborately; that the section does not visualize the substitution of the judgment of

8 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. the Commissioner for that of the Income Tax Officer, who passed the order unless the Commissioner for that of the Income Tax Officer, who passed the order unless the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suo motu revisional the decision is not in accordance with the law; that to invoke suo motu revisional the decision is not in accordance with the law; that to invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must powers to reopen a concluded assessment under Sec.263, the Commissioner must powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax easons; that a bare reiteration by him that the order of the Income Tax easons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or not suffice; that the reasons must be such as to show that the enhancement or not suffice; that the reasons must be such as to show that the enhancement or modification of modification of the assessment or cancellation of the assessment or directions the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the issued for a fresh assessment were called for, and must irresistibly lead to the issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but conclusion that the order of the Income Tax Officer was not only erroneous but conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in is not called upon to write an elaborate judgment giving detailed reasons in is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the respect of each and every disallowance, deduction, etc., it is incumbent upon the respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revi Commissioner not to exercise his suo motu revisional powers unless supported by sional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the adequate reasons for doing so; that if a query is raised during the course of the adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer wer Assessing Officer, but neither the query nor the answer wer Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of assessment order, this would not by itself lead to the conclusion that the order of assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. the Assessing Officer called for interference and revision. 27. In Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing 27. In Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing 27. In Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing Officer in Officer in the assessment order is not required to give a detailed reason in respect the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc.; that whether there was application of of each and every item of deduction, etc.; that whether there was application of of each and every item of deduction, etc.; that whether there was application of mind before allowing the expenditure in question has to be seen; that if there was mind before allowing the expenditure in question has to be seen; that if there was mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even i an inquiry, even inadequate that would not by itself give occasion to the nadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different Commissioner to pass orders under Sec.263 merely because he has a different Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of opinion in the matter; that it is only in cases of lack of inquiry that such a course of opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an asses action would be open; that an assessment order made by the Income Tax Officer sment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to cannot be branded as erroneous by the Commissioner simply because, according to cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some him, the order should have been written more elaborately; there must be some him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax whic prima facie material on record to show that the tax which was lawfully exigible h was lawfully exigible has not been imposed or that by the application of the relevant statute on an has not been imposed or that by the application of the relevant statute on an has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been incorrect or incomplete interpretation, a lesser tax than what was just, has been incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. In that case, the Delhi High Court held that the Commissioner i imposed. In that case, the Delhi High Court held that the Commissioner i imposed. In that case, the Delhi High Court held that the Commissioner in the exercise of revisional power could not have objected to the finding of the Assessing exercise of revisional power could not have objected to the finding of the Assessing exercise of revisional power could not have objected to the finding of the Assessing Officer that expenditure on tools and dies by the assessee, a manufacturer of Car Officer that expenditure on tools and dies by the assessee, a manufacturer of Car Officer that expenditure on tools and dies by the assessee, a manufacturer of Car parts, is revenue expenditure where the said claim was allowed by the latter on parts, is revenue expenditure where the said claim was allowed by the latter on parts, is revenue expenditure where the said claim was allowed by the latter on being satisfied with the explanation of the assessee and where the same ng satisfied with the explanation of the assessee and where the same ng satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the accounting practice followed by the assessee for number of years with the accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer had approval of the Income Tax Authorities. It held that the Assessing Officer had approval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very called for explanation on the very item from the assessee and the assessee had item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order did not furnished its explanation. Merely because the Assessing Officer in his order did not furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as make an elaborate discussion in that regard, his order cannot be termed as make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is erroneous. The opinion of the Assessing Officer is one of the possible views and one of the possible views and there was no material before the Commissioner to vary that opinion and ask for there was no material before the Commissioner to vary that opinion and ask for there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. fresh inquiry. 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an order is consideration of the Commissioner as to whether an order is consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the it is prejudicial to the interests of the Revenue, must be based on materials on the it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on record of the proceedings called for by him. If there are no materials on record on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting i the basis of which it can be said that the Commissioner acting i the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by manner could have come to such a conclusion, the very initiation of proceedings by manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It held that the Commissioner cannot him will be illegal and without jurisdiction. It held that the Commissioner cannot him will be illegal and without jurisdiction. It held that the Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in m initiate proceedings with a view to start fishing and roving inquiries in m initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to orders which are already concluded; that the department cannot be permitted to orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions begin fresh litigation because of new views they entertain on facts or new versions begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of which they present as to what should be the inference or proper inference either of which they present as to what should be the inference or proper inference either of

9 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. the facts disclosed or the weight of the circumstance; that if this is permitted, the facts disclosed or the weight of the circumstance; that if this is permitted, the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted; that to do litigation would have no end except when legal ingenuity is exhausted; that to do litigation would have no end except when legal ingenuity is exhausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases so is to divide one argument into two and multiply the litigation. It held that cases so is to divide one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment e visualized where the Income Tax Officer while making an assessment e visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and examines the accounts, makes inquiries, applies his mind to the facts and examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the circumstances of the case and determines the income either by accepting the circumstances of the case and determines the income either by accepting the account or by making some estimate hi account or by making some estimate himself; that the Commissioner, on perusal of mself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate made by the Officer concerned the record, may be of the opinion that the estimate made by the Officer concerned the record, may be of the opinion that the estimate made by the Officer concerned was on the lower side and left to the Commissioner he would have estimated the was on the lower side and left to the Commissioner he would have estimated the was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined b income at a figure higher than the one determined by the Income Tax Officer; but y the Income Tax Officer; but that would not vest the Commissioner with power to reexamine the accounts and that would not vest the Commissioner with power to reexamine the accounts and that would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure; there must be material available determine the income himself at a higher figure; there must be material available determine the income himself at a higher figure; there must be material available on the record called for by the Commissioner to satisfy him prima on the record called for by the Commissioner to satisfy him prima on the record called for by the Commissioner to satisfy him prima facie that the order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, it would amount to giving unbridled and arbitrary power to the revising authority it would amount to giving unbridled and arbitrary power to the revising authority it would amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re to initiate proceedings for revision in every case and start re to initiate proceedings for revision in every case and start re-examination and fresh inquiry in matters which have already been concluded under law. fresh inquiry in matters which have already been concluded under law. fresh inquiry in matters which have already been concluded under law. 29. In M.S. Raju (15 Supra), this Court has held that the power of the Commissioner 29. In M.S. Raju (15 Supra), this Court has held that the power of the Commissioner 29. In M.S. Raju (15 Supra), this Court has held that the power of the Commissioner under Sec.263( under Sec.263(1) is not limited only to the material which was available before the 1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the Revenue, the Assessing Officer and, in order to protect the interests of the Revenue, the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any other records which are available at the Commissioner is entitled to examine any other records which are available at the Commissioner is entitled to examine any other records which are available at the time of examination by him a time of examination by him and to take into consideration even those events which nd to take into consideration even those events which arose subsequent to the order of assessment. arose subsequent to the order of assessment. 30. In Rampyari Devi Saraogi (21 Supra), the Commissioner in exercise of 30. In Rampyari Devi Saraogi (21 Supra), the Commissioner in exercise of 30. In Rampyari Devi Saraogi (21 Supra), the Commissioner in exercise of revisional powers cancelled assessee’s assessment for the years 1952 revisional powers cancelled assessee’s assessment for the years 1952 revisional powers cancelled assessee’s assessment for the years 1952-1953 to 1960-61 because he found that the income tax officer was not justified in accepting 1 because he found that the income tax officer was not justified in accepting 1 because he found that the income tax officer was not justified in accepting the initial capital, the gift received and sale of jewellery, the income from business the initial capital, the gift received and sale of jewellery, the income from business the initial capital, the gift received and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever . He directed the income tax etc., without any enquiry or evidence whatsoever . He directed the income tax etc., without any enquiry or evidence whatsoever . He directed the income tax officer to do officer to do fresh assessment after making proper enquiry and investigation in fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that regard to the jurisdiction. The assessee complained before the Supreme Court that regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. Supreme Court held that there no fair or reasonable opportunity was given to her. Supreme Court held that there no fair or reasonable opportunity was given to her. Supreme Court held that there was ample material to sho was ample material to show that the income tax officer made the assessments in w that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each undue hurry; that he had passed a short stereo typed assessment order for each undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre assessment year; that on the face of the record, the orders were pre assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejud interest of the Revenue; and no prejudice was caused to the assessee on account of ice was caused to the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as failure of the Commissioner to indicate the results of the enquiry made by him, as failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he she would have a full opportunity for showing to the income tax officer whether he she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the incom had jurisdiction or not and whether the income tax assessed in the assessment e tax assessed in the assessment years which were originally passed were correct or not" years which were originally passed were correct or not" 31. From the above decisions, the following principles as to exercise of jurisdiction 31. From the above decisions, the following principles as to exercise of jurisdiction 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be culled out: by the Commissioner u/s.263 of the Act can be culled out: a) The Commissioner h a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order of as 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 Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If erroneous but is not prejudicial to the Revenue or if the interests of the Revenue. If erroneous but is not prejudicial to the Revenue or if the interests of the Revenue. If erroneous but is not prejudicial to the Revenue or if it is not erroneou it is not erroneous but it is prejudicial to the Revenue – recourse cannot be had to recourse cannot be had to Sec.263 (1) of the Act. Sec.263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing Officer b) Every loss of revenue as a consequence of an order of the Assessing Officer b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when cannot be treated as prejudicial to the interests of the Revenue. For example, when cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income n Income-tax Officer adopted one of the courses permissible in law and it has tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income tax resulted in loss of Revenue: or where two views are possible and the Income tax resulted in loss of Revenue: or where two views are possible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot Officer has taken one view with which the Commissioner does not agree, it cannot Officer has taken one view with which the Commissioner does not agree, it cannot

10 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. be treated as an be treated as an erroneous order prejudicial to the interests of the Revenue, unless erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income the view taken by the Income-tax Officer is unsustainable in law. tax Officer is unsustainable in law. c) To invoke suo motu revisional powers to reopen a concluded assessment under c) To invoke suo motu revisional powers to reopen a concluded assessment under c) To invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reason Sec.263, the Commissioner must give reasons; that a bare reiteration by him that s; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show interests of the Revenue, will not suffice; that the reasons must be such as to show interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the co that the and must irresistibly lead to the conclusion that the order of the Income nclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Tax Officer was not only erroneous but was prejudicial to the interests of the Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an Revenue. Thus, while the Income Tax Officer is not called upon to write an Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each an elaborate judgment giving detailed reasons in respect of each an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to disallowance, deduction, etc., it is incumbent upon the Commissioner not to disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for exercise his suo motu revisional powers unless supported by adequate reasons for exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing doing so; that if a query is raised during the course of the scrutiny by the Assessing doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither cer, which was answered to the satisfaction of the Assessing Officer, but neither cer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by the query nor the answer were reflected in the assessment order, this would not by the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for itself lead to the conclusion that the order of the Assessing Officer called for itself lead to the conclusion that the order of the Assessing Officer called for interferen interference and revision. e) The Commissioner cannot initiate proceedings with a view to start fishing and e) The Commissioner cannot initiate proceedings with a view to start fishing and e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the roving inquiries in matters or orders which are already concluded; that the roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views department cannot be permitted to begin fresh litigation because of new views department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new circumstance; that if this is permitted, litigation y entertain on facts or new circumstance; that if this is permitted, litigation y entertain on facts or new circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted would have no end except when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure in f) Whether there was application of mind before allowing the expenditure in f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there w question has to be seen; that if there was an inquiry, even inadequate that would as an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 not by itself give occasion to the Commissioner to pass orders under Sec.263 not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of merely because he has a different opinion in the matter; that it is only in cases of merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would b lack of inquiry that such a course of action would be open; that an assessment e open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the order made by the Income Tax Officer cannot be branded as erroneous by the order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been Commissioner simply because, according to him, the order should have been Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to written more elaborately; there must be some prima facie material on record to written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the how that the tax which was lawfully exigible has not been imposed or that by the how that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a application of the relevant statute on an incorrect or incomplete interpretation, a application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. lesser tax than what was just, has been imposed. g) The power of the Commissioner under Se g) The power of the Commissioner under Sec.263 (1) is not Commissioner is c.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of entitled to examine any other records which are available at the time of entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose examination by him and to take into consideration even those events which arose examination by him and to take into consideration even those events which arose subsequent to the order of assessment. We now examine the following ju subsequent to the order of assessment. We now examine the following ju subsequent to the order of assessment. We now examine the following judgments on this issue: on this issue:- DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High Court) It was held that revisionary power u/s 263 is conferred on the Court) It was held that revisionary power u/s 263 is conferred on the Court) It was held that revisionary power u/s 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower Commissioner/Director of Income Tax when an order passed by the lower Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous authority is erroneous and prejudicial to the interest of the Revenue. Orders which and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and are passed without inquiry or investigation are treated as erroneous and are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after prejudicial to the interest of the Revenue, but orders which are passed after prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue inquiry/investigation on the question/issue are not per se or normally treated as are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary erroneous and prejudicial to the interest of the Revenue because the revisionary erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or authority feels and opines that further inquiry/investigation was required or authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. deeper or further scrutiny should be undertaken. INCOME TA INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) X OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against Revenue does not have any right to appeal to the first appellate authority against Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the an order passed by the Assessing Officer. S. 263 has been enacted to empower the an order passed by the Assessing Officer. S. 263 has been enacted to empower the

11 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. CIT to exercise power of revision a CIT to exercise power of revision and revise any order passed by the Assessing nd revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of revised should be erroneous and secondly, it should be prejudicial to the interest of revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a import and is not confined to merely loss of tax. The term "erroneous" means a import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error wrong/incorrect decision deviating from law. This expression postulates an error wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assess which makes an order unsustainable in law. The Assessing Officer is both an ing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides investigator and an adjudicator. If the Assessing Officer as an adjudicator decides investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, a question or aspect and makes a wrong assessment which is unsustainable in law, a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary p it can be corrected by the Commissioner in exercise of revisionary p it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts investigator, it is incumbent upon the Assessing Officer to investigate the facts investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the required to be examined and verified to compute the taxable income. If the required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and Assessing Officer fails to conduct the said investigation, he commits an error and Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order word "erroneous" includes failure to make the enquiry. In such cases, the order word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not becomes erroneous because enquiry or verification has not been made and not becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. Thus, in cases of wrong opinion because a wrong order has been passed on merits. Thus, in cases of wrong opinion because a wrong order has been passed on merits. Thus, in cases of wrong opinion or finding on merit or finding on merits, the CIT has to come to the conclusion and himself decide that s, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, the order is erroneous, by conducting necessary enquiry, if required and necessary, the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing before the order under s. 263 is passed. In such cases, the order of the Assessing before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneou Officer will be erroneous because the order passed is not sustainable in law and s because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing the said finding must be recorded. CIT cannot remand the matter to the Assessing the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where Officer to decide whether the findings recorded are erroneous. In cases where Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack there is inadequate enquiry but not lack of enquiry, again the CIT must give and of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an record a finding that the order/inquiry made is erroneous. This can happen if an record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and enquiry and verification is conducted by the CIT and he is able to establish and enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Offic show the error or mistake made by the Assessing Officer, making the order er, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show unsustainable in Law. In some cases possibly though rarely, the CIT can also show unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per and establish that the facts on record or inferences drawn from facts on record per and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the As se justified and mandated further enquiry or investigation but the As se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must Officer had erroneously not undertaken the same. However, the said finding must Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a be clear, unambiguous and not debatable. The matter cannot be remitted for a be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a fresh decision to the Assessing Officer to conduct further enquiries without a fresh decision to the Assessing Officer to conduct further enquiries without a finding that finding that the order is erroneous. Finding that the order is erroneous is a the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under condition or requirement which must be satisfied for exercise of jurisdiction under condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and me Officer would imply and mean the CIT has not examined and decided whether or an the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the not the order is erroneous but has directed the Assessing Officer to decide the not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising aspect/question. This distinction must be kept in mind by the CIT while exercising aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and i jurisdiction under s. 263 of the Act and in the absence of the finding that the order n the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction 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 under the said section is not sustainable. In most cases of alleged "inadequate under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that investigation", it will be difficult to hold that the order of the Assessing Officer, who the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without had conducted enquiries and had acted as an investigator, is erroneous, without had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or CIT conducting verification/inquiry. The order of the Assessing Officer may be or CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on may not be wrong. CIT cannot direct reconsideration on this ground but only when this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the the order is erroneous. An order of remit cannot be passed by the CIT to ask the 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 Assessing Officer to decide whether the order was erroneous. This is not Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records rea permissible. An order is not erroneous, unless the CIT hold and records rea 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 why it is erroneous. An order will not become erroneous because on remit, the 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 Assessing Officer may decide that the order is erroneous. Therefore CIT must after Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition recording reasons hold that the order is erroneous. The jurisdictional precondition 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 ated is that the CIT must come to the conclusion that the order is erroneous ated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the CIT can and is unsustainable in law. It may be noticed that the material which the CIT can and is unsustainable in law. It may be noticed that the material which the CIT can rely includes not only the record as it stands at the time when the order in question rely includes not only the record as it stands at the time when the order in question rely includes not only the record as it stands at the time when the order in question was passed was passed by the Assessing Officer but also the record as it stands at the time of by the Assessing Officer but also the record as it stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from collecting and examination by the CIT. Nothing bars/prohibits the CIT from collecting and examination by the CIT. Nothing bars/prohibits the CIT from collecting and

12 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. relying upon new/additional material/evidence to show and state that the order relying upon new/additional material/evidence to show and state that the order relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is of the Assessing Officer is erroneous. COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR As COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR As COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR As regard the submission on behalf of the Revenue that power under Section 263 of regard the submission on behalf of the Revenue that power under Section 263 of regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held the Act can be exercised even in a case where the issue is debatable, it was held the Act can be exercised even in a case where the issue is debatable, it was held that the case that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a that the Commissioner can exercise power under Section 263 of the Act even in a that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again case were the issue is debatable was a mere passing remark which is again case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the A contrary to the view taken by the Apex Court in the case of Malabar Industrial pex Court in the case of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the cannot be said that the view taken by him is erroneous nor the order of the cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in Assessing Officer in that case can be set aside in revision. It has to be shown revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything unmistakably that the order of the Assessing Officer is unsustainable. Anything unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under short of that would not clothe the CIT with jurisdiction to exercise power under short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Raison Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar vs. Raison Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar vs. Raison Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessi third question as to whether the assessment order was passed by the Assessi third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the Officer without application of mind, it was held that the Court has to start with the Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to presumption that the assessment order was regularly passed. There is evidence to presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions show that the assessing officer had required the assessee to answer 17 questions show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that o file documents in regard thereto. It is difficult to proceed on the basis that o file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without the 17 questions raised by him did not require application of mind. Without the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under application of mind the questions raised by him in the annexure to notice under application of mind the questions raised by him in the annexure to notice under Section 142(1) of t Section 142(1) of the Act could not have been formulated. The Assessing Officer he Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his was required to examine the return filed by the assessee in order to ascertain his was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was income and to levy appropriate tax on that basis. When the Assessing Officer was income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, file satisfied that the return, filed by the assessee, was in accordance with law, he was d by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the under no obligation to justify as to why was he satisfied. On the top of that the under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any Assessing Officer by his order dated 28th March, 2008 did not adversely affect any Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civ right of the assessee nor was any civil right of the assessee prejudiced. He was as il right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers such under no obligation in law to give reasons. The fact, that all requisite papers such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled were summoned and thereafter the matter was heard from time to time coupled were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not with the fact that the view taken by him is not shown by the revenue to be shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a erroneous and was also considered both by the Tribunal as also by us to be a erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the possible view, strengthens the presumption under Clause (e) of Section 114 of the possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid pr Evidence Act. A prima facie evidence, on the basis of the aforesaid pr Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the thus converted into a conclusive proof of the fact that the order was passed by the thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 3 vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 3 vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. (Paras 90 distinguished. (Paras 90-92, 102) COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 ITR 238 (P&H HC) A reference to the provisions of s. 263 shows that jurisdiction thereunder can HC) A reference to the provisions of s. 263 shows that jurisdiction thereunder can HC) A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial be exercised if the CIT finds that the order of the AO was erroneous and prejudicial be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a diffe to the interest of Revenue. Mere audit objection and merely because a diffe to the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was view could be taken, were not enough to say that the order of the AO was view could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be d rule could be laid down about the situation when the jurisdiction can be d rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present or not, has to be decided having regard to a given fact situation. In the present or not, has to be decided having regard to a given fact situation. In the present case, the Tri case, the Tribunal has held that the assessee had disclosed that out of sale bunal has held that the assessee had disclosed that out of sale consideration, a sum of Rs. 1 lakh was to be received for sale of permit. If that is so, consideration, a sum of Rs. 1 lakh was to be received for sale of permit. If that is so, consideration, a sum of Rs. 1 lakh was to be received for sale of permit. If that is so,

13 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. there was no error in the view taken by the AO and no case was made out for there was no error in the view taken by the AO and no case was made out for there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under invoking jurisdiction under s. 263. COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. 341 ITR 166 COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. 341 ITR 166 COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. 341 ITR 166 (Del) The prerequisite to the exercise of suo motu jurisdiction under s. 263 by the (Del) The prerequisite to the exercise of suo motu jurisdiction under s. 263 by the (Del) The prerequisite to the exercise of suo motu jurisdiction under s. 263 by the CIT is that the order of the AO is erroneous insofar as it is prejudicial to the CIT is that the order of the AO is erroneous insofar as it is prejudicial to the CIT is that the order of the AO is erroneous insofar as it is prejudicial to the interest of interest of the Revenue. Two conditions are to be satisfied, namely, (i) the order of the Revenue. Two conditions are to be satisfied, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) the error committed by the AO in the AO sought to be revised is erroneous; and (ii) the error committed by the AO in the AO sought to be revised is erroneous; and (ii) the error committed by the AO in the order is prejudicial to the interest of the Revenue. Both these conditions are to the order is prejudicial to the interest of the Revenue. Both these conditions are to the order is prejudicial to the interest of the Revenue. Both these conditions are to be satisfied be satisfied simultaneously. It is also well-settled principle that provisions of s. 263 settled principle that provisions of s. 263 would not be invoked merely to correct a mistake or error committed by the AO would not be invoked merely to correct a mistake or error committed by the AO would not be invoked merely to correct a mistake or error committed by the AO unless it has caused prejudice to the interest of the Revenue. If an order is based on unless it has caused prejudice to the interest of the Revenue. If an order is based on unless it has caused prejudice to the interest of the Revenue. If an order is based on incorrect assu incorrect assumption of facts or on incorrect application of law or without mption of facts or on incorrect application of law or without applying the principles of natural justice and without application of mind, it would applying the principles of natural justice and without application of mind, it would applying the principles of natural justice and without application of mind, it would be treated as erroneous. Likewise, the expression "prejudicial to the interest of the be treated as erroneous. Likewise, the expression "prejudicial to the interest of the be treated as erroneous. Likewise, the expression "prejudicial to the interest of the Revenue" is of wide imp Revenue" is of wide import and is not confined to loss of tax. If due to an erroneous ort and is not confined to loss of tax. If due to an erroneous order of the AO the Revenue is losing tax lawfully payable by a person, it would be order of the AO the Revenue is losing tax lawfully payable by a person, it would be order of the AO the Revenue is losing tax lawfully payable by a person, it would be certainly prejudicial to the interest of the Revenue. The power of revision is not certainly prejudicial to the interest of the Revenue. The power of revision is not certainly prejudicial to the interest of the Revenue. The power of revision is not meant to be exercised for meant to be exercised for the purpose of directing the AO to hold another the purpose of directing the AO to hold another investigation without describing as to how the order of the AO is erroneous. From investigation without describing as to how the order of the AO is erroneous. From investigation without describing as to how the order of the AO is erroneous. From this it also follows that where the assessment order has been passed by the AO this it also follows that where the assessment order has been passed by the AO this it also follows that where the assessment order has been passed by the AO after taking into account the assessee's submis after taking into account the assessee's submissions and documents furnished by sions and documents furnished by him and no material whatsoever has been brought on record by the CIT which him and no material whatsoever has been brought on record by the CIT which him and no material whatsoever has been brought on record by the CIT which showed that there was any discrepancy or falsity in evidences furnished by the showed that there was any discrepancy or falsity in evidences furnished by the showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the AO cannot be set aside for making deep inq assessee, the order of the AO cannot be set aside for making deep inq assessee, the order of the AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a the presumption and assumption that something new may come out. For making a the presumption and assumption that something new may come out. For making a valid order under s. 263 it is essential that the CIT has to record an express finding valid order under s. 263 it is essential that the CIT has to record an express finding valid order under s. 263 it is essential that the CIT has to record an express finding to the effect that order passed by the AO is erroneous which has caused loss to to the effect that order passed by the AO is erroneous which has caused loss to to the effect that order passed by the AO is erroneous which has caused loss to the Revenue. Furthermore, where acting in accordance with law the AO frames certain Revenue. Furthermore, where acting in accordance with law the AO frames certain Revenue. Furthermore, where acting in accordance with law the AO frames certain assessment order, same cannot be branded as erroneous simply because according assessment order, same cannot be branded as erroneous simply because according assessment order, same cannot be branded as erroneous simply because according to the CIT, the order should be written more elaborately. to the CIT, the order should be written more elaborately.—Malabar Industrial Co. Malabar Industrial Co. Ltd. vs. CI Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC), Gee Vee Enterprises vs. T (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC), Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del), CIT vs. Seshasayee Paper & Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del), CIT vs. Seshasayee Paper & Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del), CIT vs. Seshasayee Paper & Boards Ltd. (2000) 242 ITR 490 (Mad), CWT vs. Prithvi Raj & Co. (1991) 98 CTR Boards Ltd. (2000) 242 ITR 490 (Mad), CWT vs. Prithvi Raj & Co. (1991) 98 CTR Boards Ltd. (2000) 242 ITR 490 (Mad), CWT vs. Prithvi Raj & Co. (1991) 98 CTR (Del) 216 : (1993) 199 (Del) 216 : (1993) 199 ITR 424 (Del) and J.P. Srivastava& Sons (Kanpur) Ltd. vs. ITR 424 (Del) and J.P. Srivastava& Sons (Kanpur) Ltd. vs. CIT (1978) 111 ITR 326 (All) relied on. CIT (1978) 111 ITR 326 (All) relied on. (Paras 6 & 7) In the entire order emphasis laid by the CIT is that in respect of four (Paras 6 & 7) In the entire order emphasis laid by the CIT is that in respect of four (Paras 6 & 7) In the entire order emphasis laid by the CIT is that in respect of four issues mentioned by him, no queries were raised by the AO. On this pre issues mentioned by him, no queries were raised by the AO. On this pre issues mentioned by him, no queries were raised by the AO. On this premise, though it is observed that there was no application of mind on the part of the AO and the it is observed that there was no application of mind on the part of the AO and the it is observed that there was no application of mind on the part of the AO and the AO has not recorded any reasons to justify the omission to consider the said facts, AO has not recorded any reasons to justify the omission to consider the said facts, AO has not recorded any reasons to justify the omission to consider the said facts, the CIT does not take the said order to its logical conclusion which was the the CIT does not take the said order to its logical conclusion which was the the CIT does not take the said order to its logical conclusion which was the prime duty of the CIT in order to justify exercise of power under s. 263. There is not even duty of the CIT in order to justify exercise of power under s. 263. There is not even duty of the CIT in order to justify exercise of power under s. 263. There is not even a whisper that the order is erroneous. Even if it is inferred that non a whisper that the order is erroneous. Even if it is inferred that non a whisper that the order is erroneous. Even if it is inferred that non-consideration of the issues pointed out by the CIT would amount to an erroneous order, it is of the issues pointed out by the CIT would amount to an erroneous order, it is of the issues pointed out by the CIT would amount to an erroneous order, it is not stated as to how this order is prejudicial to the interest of the Revenue. The stated as to how this order is prejudicial to the interest of the Revenue. The stated as to how this order is prejudicial to the interest of the Revenue. The penultimate paras of the order, at best, contain the observations that the AO was penultimate paras of the order, at best, contain the observations that the AO was penultimate paras of the order, at best, contain the observations that the AO was satisfied with making flimsy additions which were deleted by the CIT(A). There is satisfied with making flimsy additions which were deleted by the CIT(A). There is satisfied with making flimsy additions which were deleted by the CIT(A). There is not a wh not a whisper as to how this order was prejudicial to the interest of the Revenue. isper as to how this order was prejudicial to the interest of the Revenue. That apart, the approach of the Tribunal in discarding the observation of the CIT That apart, the approach of the Tribunal in discarding the observation of the CIT That apart, the approach of the Tribunal in discarding the observation of the CIT about not making proper inquiries in respect of the said four issues is also justified about not making proper inquiries in respect of the said four issues is also justified about not making proper inquiries in respect of the said four issues is also justified and without and without blemish. (Paras 12 to 14) First comment of the CIT was in respect of finished goods in the (Paras 12 to 14) First comment of the CIT was in respect of finished goods in the (Paras 12 to 14) First comment of the CIT was in respect of finished goods in the closing stock. The CIT found that these were to the tune of Rs. 5.28 crores. closing stock. The CIT found that these were to the tune of Rs. 5.28 crores. closing stock. The CIT found that these were to the tune of Rs. 5.28 crores. According to the CIT, when the total turnover of the assessee was Rs. 6.13 crores, According to the CIT, when the total turnover of the assessee was Rs. 6.13 crores, According to the CIT, when the total turnover of the assessee was Rs. 6.13 crores, the AO should have satisfied himself by calling for more details as to how there was AO should have satisfied himself by calling for more details as to how there was AO should have satisfied himself by calling for more details as to how there was

14 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. closing stock of such a magnitude of Rs. 5.28 crores. Thus, the CIT has not doubted closing stock of such a magnitude of Rs. 5.28 crores. Thus, the CIT has not doubted closing stock of such a magnitude of Rs. 5.28 crores. Thus, the CIT has not doubted the statement of finished goods in the closing stock furnished by the assessee. He the statement of finished goods in the closing stock furnished by the assessee. He the statement of finished goods in the closing stock furnished by the assessee. He has only remarked that there should have been a deeper probe by calling for more remarked that there should have been a deeper probe by calling for more details. This is neither here nor there, when one keeps in view the ingredients of s. details. This is neither here nor there, when one keeps in view the ingredients of s. details. This is neither here nor there, when one keeps in view the ingredients of s. 263. (Para 15) Insofar as the insurance claim is concerned, the CIT observed that the (Para 15) Insofar as the insurance claim is concerned, the CIT observed that the (Para 15) Insofar as the insurance claim is concerned, the CIT observed that the assessee h assessee had shown receivable on this account to the tune of Rs. 1.21 crores but no ad shown receivable on this account to the tune of Rs. 1.21 crores but no details had been furnished. The AO had also not made any inquiries. In the detailed details had been furnished. The AO had also not made any inquiries. In the detailed details had been furnished. The AO had also not made any inquiries. In the detailed discussion on this aspect, the Tribunal has observed that insurance claim was discussion on this aspect, the Tribunal has observed that insurance claim was discussion on this aspect, the Tribunal has observed that insurance claim was lodged for the goods lodged for the goods lost in transit. The assessee at that time had merely filed a lost in transit. The assessee at that time had merely filed a claim with the insurance company. This claim had not been approved as the claim with the insurance company. This claim had not been approved as the claim with the insurance company. This claim had not been approved as the insurance company had neither accepted the same nor given any assurance for insurance company had neither accepted the same nor given any assurance for insurance company had neither accepted the same nor given any assurance for making payment. Therefore, no income had "a making payment. Therefore, no income had "accrued" which could be taxed. The ccrued" which could be taxed. The Tribunal rightly held that ordinarily the income is said to have accrued to a person Tribunal rightly held that ordinarily the income is said to have accrued to a person Tribunal rightly held that ordinarily the income is said to have accrued to a person when he acquires the right to income and this should be enforceable right, though when he acquires the right to income and this should be enforceable right, though when he acquires the right to income and this should be enforceable right, though actual quantification or receipt may follow in due cour actual quantification or receipt may follow in due course. The mere claim to se. The mere claim to income without any enforceable right cannot be regarded as an accrued income income without any enforceable right cannot be regarded as an accrued income income without any enforceable right cannot be regarded as an accrued income for the purpose of IT Act. for the purpose of IT Act. (Para 16) Coming to the claim under s. 80HHC, it was totally uncalled for on the (Para 16) Coming to the claim under s. 80HHC, it was totally uncalled for on the (Para 16) Coming to the claim under s. 80HHC, it was totally uncalled for on the part of the CIT to say that the AO did not make part of the CIT to say that the AO did not make requisite inquiries because of the requisite inquiries because of the simple reason that the AO had, in fact, declined and rejected this claim of the simple reason that the AO had, in fact, declined and rejected this claim of the simple reason that the AO had, in fact, declined and rejected this claim of the assessee. If the AO himself disallowed the deduction claimed by the assessee on this assessee. If the AO himself disallowed the deduction claimed by the assessee on this assessee. If the AO himself disallowed the deduction claimed by the assessee on this account under s. 80HHC, one fails to understand what fur account under s. 80HHC, one fails to understand what fur account under s. 80HHC, one fails to understand what further inquiries were needed by the AO. needed by the AO. (Para 17) Lastly, the observations of the CIT are in respect of the income of Rs. (Para 17) Lastly, the observations of the CIT are in respect of the income of Rs. (Para 17) Lastly, the observations of the CIT are in respect of the income of Rs. 1.61 crores 1.61 crores shown by the assessee on account of variation in exchange rate. The shown by the assessee on account of variation in exchange rate. The CIT has only observed that in the immediate previous year no such gain was shown CIT has only observed that in the immediate previous year no such gain was shown CIT has only observed that in the immediate previous year no such gain was shown and therefore, it needed examination by the AO. However, the moot question would and therefore, it needed examination by the AO. However, the moot question would and therefore, it needed examination by the AO. However, the moot question would be examination for what p be examination for what purpose ? It is an income shown by the assessee. Whether urpose ? It is an income shown by the assessee. Whether the CIT was of the opinion that there was no such income or he was nurturing an the CIT was of the opinion that there was no such income or he was nurturing an the CIT was of the opinion that there was no such income or he was nurturing an impression that income on this account as shown was lesser ? There is no such impression that income on this account as shown was lesser ? There is no such impression that income on this account as shown was lesser ? There is no such indication in the order. The CIT also does indication in the order. The CIT also does not at all state as to what was the reason not at all state as to what was the reason for doubting the income offered by the assessee. Even if it is found that part of such for doubting the income offered by the assessee. Even if it is found that part of such for doubting the income offered by the assessee. Even if it is found that part of such income was claimed as deduction under s. 80HHC, no benefit enured to the income was claimed as deduction under s. 80HHC, no benefit enured to the income was claimed as deduction under s. 80HHC, no benefit enured to the assessee on this account as claim under s. 80HHC was assessee on this account as claim under s. 80HHC was fully disallowed by the AO. It fully disallowed by the AO. It is not at all observed as to how the order of the AO on this account was erroneous is not at all observed as to how the order of the AO on this account was erroneous is not at all observed as to how the order of the AO on this account was erroneous and further as to how it was prejudicial to the interest of the Revenue. Thus, order and further as to how it was prejudicial to the interest of the Revenue. Thus, order and further as to how it was prejudicial to the interest of the Revenue. Thus, order of the CIT was rightly set aside by the Tribunal. In the of the CIT was rightly set aside by the Tribunal. In the case on hand the ld. CIT case on hand the ld. CIT finds fault with the AO for not invoking Rule 8D while making disallowance u/s finds fault with the AO for not invoking Rule 8D while making disallowance u/s finds fault with the AO for not invoking Rule 8D while making disallowance u/s 14A. The Hon’ble Delhi High Court in the case of Maxop Investments Ltd. Vs CIT 14A. The Hon’ble Delhi High Court in the case of Maxop Investments Ltd. Vs CIT 14A. The Hon’ble Delhi High Court in the case of Maxop Investments Ltd. Vs CIT (supra) held that the AO cannot proceed to determine the amount of expen (supra) held that the AO cannot proceed to determine the amount of expen (supra) held that the AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is not incurred in relation to exempt income without recording a finding that he is not incurred in relation to exempt income without recording a finding that he is not satisfied with the correctness of the claim of the assessee. This is a condition satisfied with the correctness of the claim of the assessee. This is a condition satisfied with the correctness of the claim of the assessee. This is a condition precedent while rejecting the claim of the assessee, with regard to incurring of precedent while rejecting the claim of the assessee, with regard to incurring of precedent while rejecting the claim of the assessee, with regard to incurring of expenditure or no expenditure in relation to exempt income. The AO will have to iture or no expenditure in relation to exempt income. The AO will have to iture or no expenditure in relation to exempt income. The AO will have to indicate cogent reasons for the same and Rule 8D comes into play only when the indicate cogent reasons for the same and Rule 8D comes into play only when the indicate cogent reasons for the same and Rule 8D comes into play only when the AO records a finding that he is not satisfied with the assessee’s method. In the case AO records a finding that he is not satisfied with the assessee’s method. In the case AO records a finding that he is not satisfied with the assessee’s method. In the case in hand the AO ha in hand the AO has not made any such recording of satisfaction and has accepted s not made any such recording of satisfaction and has accepted the disallowance made u/s 14A by the assessee. In such circumstances it is not the disallowance made u/s 14A by the assessee. In such circumstances it is not the disallowance made u/s 14A by the assessee. In such circumstances it is not open for the ld. CIT to come to a conclusion that the AO should have invoked Rule open for the ld. CIT to come to a conclusion that the AO should have invoked Rule open for the ld. CIT to come to a conclusion that the AO should have invoked Rule 8D, without himself recording th 8D, without himself recording the satisfaction that the calculation given by the e satisfaction that the calculation given by the assessee in its disallowance made suo moto u/s 14A is not correct. Coming to the assessee in its disallowance made suo moto u/s 14A is not correct. Coming to the assessee in its disallowance made suo moto u/s 14A is not correct. Coming to the other expenses claimed, the ld. CIT has simply collected information after raising other expenses claimed, the ld. CIT has simply collected information after raising other expenses claimed, the ld. CIT has simply collected information after raising queries and has not given any finding whats queries and has not given any finding whatsoever that there is an error made by oever that there is an error made by

15 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. the AO or that the circumstances was such that would require and warrant further the AO or that the circumstances was such that would require and warrant further the AO or that the circumstances was such that would require and warrant further inquiry or investigation. No error in the assessment order has been pointed out inquiry or investigation. No error in the assessment order has been pointed out inquiry or investigation. No error in the assessment order has been pointed out and it is not stated as to how prejudice was caused to the and it is not stated as to how prejudice was caused to the revenue. The finding that revenue. The finding that the AO had failed to properly scrutinise the above aspects does not give powers to the AO had failed to properly scrutinise the above aspects does not give powers to the AO had failed to properly scrutinise the above aspects does not give powers to the ld. CIT to revise the assessment u/s 263 of the Act. Making rowing enquiries is the ld. CIT to revise the assessment u/s 263 of the Act. Making rowing enquiries is the ld. CIT to revise the assessment u/s 263 of the Act. Making rowing enquiries is not a finding of an error. Assessments cannot be set aside for not a finding of an error. Assessments cannot be set aside for not a finding of an error. Assessments cannot be set aside for fresh enquiries unless a specific error is pointed out at not making proper enquiry cannot be equated a specific error is pointed out at not making proper enquiry cannot be equated a specific error is pointed out at not making proper enquiry cannot be equated with no enquiry. In view of the above we quash the order passed u/s 263 of the Act with no enquiry. In view of the above we quash the order passed u/s 263 of the Act with no enquiry. In view of the above we quash the order passed u/s 263 of the Act and allow the appeal of the assessee. and allow the appeal of the assessee. 12. In the result the appeal of 12. In the result the appeal of the assessee is allowed” Keeping in mind the foregoing detailed discussion that an assessment has to be Keeping in mind the foregoing detailed discussion that an assessment has to be Keeping in mind the foregoing detailed discussion that an assessment has to be both erroneous as well as prejudicial in interest of the Revenue simultaneously both erroneous as well as prejudicial in interest of the Revenue simultaneously both erroneous as well as prejudicial in interest of the Revenue simultaneously before the same is sought to be revised and it is not permissible for before the same is sought to be revised and it is not permissible for before the same is sought to be revised and it is not permissible for the CIT or the PCIT to exercise his revision jurisdiction in case the Assessing Officer has taken one PCIT to exercise his revision jurisdiction in case the Assessing Officer has taken one PCIT to exercise his revision jurisdiction in case the Assessing Officer has taken one of the possible view, we proceed to deal with the relevant facts of the case. It has of the possible view, we proceed to deal with the relevant facts of the case. It has of the possible view, we proceed to deal with the relevant facts of the case. It has come on record that the Assessing Officer had issued sec. 133(6) lett come on record that the Assessing Officer had issued sec. 133(6) lett come on record that the Assessing Officer had issued sec. 133(6) letter / notice to the M/s SHCL during the course of scrutiny which stood adequately replied in the M/s SHCL during the course of scrutiny which stood adequately replied in the M/s SHCL during the course of scrutiny which stood adequately replied in assessee’s favour. Coupled with this, all the relevant factual details in support of assessee’s favour. Coupled with this, all the relevant factual details in support of assessee’s favour. Coupled with this, all the relevant factual details in support of the assessee’s share purchase document, contract notes, bank statement, (supra) the assessee’s share purchase document, contract notes, bank statement, (supra) the assessee’s share purchase document, contract notes, bank statement, (supra) already in the case records. Coupled with this, Learned CIT already in the case records. Coupled with this, Learned CIT already in the case records. Coupled with this, Learned CIT-DR fails to rebut the clinching fact that although the PCIT’s detailed discussion extracted in the clinching fact that although the PCIT’s detailed discussion extracted in the clinching fact that although the PCIT’s detailed discussion extracted in the preceding paragraphs has sought to make out a case of artificial price rigging preceding paragraphs has sought to make out a case of artificial price rigging preceding paragraphs has sought to make out a case of artificial price rigging between the asses between the assessee, promoters entry operators of the entity in light of Ministry of see, promoters entry operators of the entity in light of Ministry of Finance’s letter dated 24.07.2015 figures, there is not even an iota of material Finance’s letter dated 24.07.2015 figures, there is not even an iota of material Finance’s letter dated 24.07.2015 figures, there is not even an iota of material quoted against the assessee to have been engaged in all the foregoing artificial quoted against the assessee to have been engaged in all the foregoing artificial quoted against the assessee to have been engaged in all the foregoing artificial price rigging. We are obs price rigging. We are observing in view of all these facts that the Assessing Officer erving in view of all these facts that the Assessing Officer had rightly accepted the assessee’s LTCG keeping in making the overwhelming had rightly accepted the assessee’s LTCG keeping in making the overwhelming had rightly accepted the assessee’s LTCG keeping in making the overwhelming evidence forming part of records. This tribunal’s co evidence forming part of records. This tribunal’s co-ordinate bench decision ordinate bench decision (supra) as well as hon'ble jurisdictional (supra) as well as hon'ble jurisdictional high court’s decisions CIT vs. Ratan ITA high court’s decisions CIT vs. Ratan ITA No.105/2016, M/s Classic Growers Ltd vs. CIT ITA 129/2012, CIT vs. No.105/2016, M/s Classic Growers Ltd vs. CIT ITA 129/2012, CIT vs. No.105/2016, M/s Classic Growers Ltd vs. CIT ITA 129/2012, CIT vs. Lakshmargarh Estate & Trading Co. Ltd. (2013) 40 taxman 439 (Cal), CIT vs. Smt. Lakshmargarh Estate & Trading Co. Ltd. (2013) 40 taxman 439 (Cal), CIT vs. Smt. Lakshmargarh Estate & Trading Co. Ltd. (2013) 40 taxman 439 (Cal), CIT vs. Smt. Shreyashi Ganguly ITA 196/2012, CIT vs. Bhagwati Prasad Agarwal (200 Shreyashi Ganguly ITA 196/2012, CIT vs. Bhagwati Prasad Agarwal (200 Shreyashi Ganguly ITA 196/2012, CIT vs. Bhagwati Prasad Agarwal (2009/ TMI 34738/Cal in 22/2009 29.04.2009 have accepted genuineness of similar LTCG. 34738/Cal in 22/2009 29.04.2009 have accepted genuineness of similar LTCG. 34738/Cal in 22/2009 29.04.2009 have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee’s high court, we observe that the Assessing Officer had rightly treated the assessee’s high court, we observe that the Assessing Officer had rightly treated the assessee’s foregoing LTCG derived from sale of shares to be genuine. That being the case, we oing LTCG derived from sale of shares to be genuine. That being the case, we oing LTCG derived from sale of shares to be genuine. That being the case, we hold that PCIT’s exercise of revision jurisdiction merely on suspicious hold that PCIT’s exercise of revision jurisdiction merely on suspicious hold that PCIT’s exercise of revision jurisdiction merely on suspicious circumstances by invoking in sec. 263 Explanation (supra) with effect from circumstances by invoking in sec. 263 Explanation (supra) with effect from circumstances by invoking in sec. 263 Explanation (supra) with effect from 01.06.2015 is not sustaining. We 01.06.2015 is not sustaining. We therefore reverse the PCIT’s order under therefore reverse the PCIT’s order under challenge and restore the impugned assessment framed by the Assessing Officer on challenge and restore the impugned assessment framed by the Assessing Officer on challenge and restore the impugned assessment framed by the Assessing Officer on 29.07.2016. It is made clear that we have dealt with an instance of Assessing 29.07.2016. It is made clear that we have dealt with an instance of Assessing 29.07.2016. It is made clear that we have dealt with an instance of Assessing Officer himself having accepted assessee’s LTCG after e Officer himself having accepted assessee’s LTCG after examining all the relevant xamining all the relevant facts of the case. We therefore do not deem it appropriate to restore the very issue facts of the case. We therefore do not deem it appropriate to restore the very issue facts of the case. We therefore do not deem it appropriate to restore the very issue back to him for yet another round of assessment. The assesse’s sole substantive back to him for yet another round of assessment. The assesse’s sole substantive back to him for yet another round of assessment. The assesse’s sole substantive grievance as well as this “lead” appeal ITA No.01/Kol/2019 is acc grievance as well as this “lead” appeal ITA No.01/Kol/2019 is acc grievance as well as this “lead” appeal ITA No.01/Kol/2019 is accepted therefore. 9. Same order to follow in all remaining cases ITA No.02 9. Same order to follow in all remaining cases ITA No.02- -05/Kol/2019 and 13- 15/Kol/2019 in case of seven other assessees since it has come on record that they 15/Kol/2019 in case of seven other assessees since it has come on record that they 15/Kol/2019 in case of seven other assessees since it has come on record that they had also filed all the relevant evidence in support of their respective LTCG du had also filed all the relevant evidence in support of their respective LTCG du had also filed all the relevant evidence in support of their respective LTCG during the course of assessment / which stood accepted by the Assessing Officer. the course of assessment / which stood accepted by the Assessing Officer. the course of assessment / which stood accepted by the Assessing Officer. 10. All these eight assessees’ as many appeals are allowed in above terms.” 10. All these eight assessees’ as many appeals are allowed in above terms.” 10. All these eight assessees’ as many appeals are allowed in above terms.”

16 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd. 8. We respectfully apply the proposition of law laid down in the above case to the case on We respectfully apply the proposition of law laid down in the above case to the case on We respectfully apply the proposition of law laid down in the above case to the case on hand and hold that the order passed u/s 263 of the Act is bad in law. The co d hold that the order passed u/s 263 of the Act is bad in law. The co-ordinate Bench of ITAT, ordinate Bench of ITAT, Kolkata in the case of Shashi Bala Bajaj (supra) applied to the judgment of jurisdictional High Court Kolkata in the case of Shashi Bala Bajaj (supra) applied to the judgment of jurisdictional High Court Kolkata in the case of Shashi Bala Bajaj (supra) applied to the judgment of jurisdictional High Court in the case of CIT vs. Bhagwati Prasad Agarwal judgment date in the case of CIT vs. Bhagwati Prasad Agarwal judgment dated 29.04.2009 and held that the long d 29.04.2009 and held that the long term profits and gains received on, the purchase and sale of shares of M/s Surbhi Chemicals and term profits and gains received on, the purchase and sale of shares of M/s Surbhi Chemicals and term profits and gains received on, the purchase and sale of shares of M/s Surbhi Chemicals and Investment Ltd. though the Stock Exchange is exempted from tax u/s 10(38) of the Act. Thus, the Investment Ltd. though the Stock Exchange is exempted from tax u/s 10(38) of the Act. Thus, the Investment Ltd. though the Stock Exchange is exempted from tax u/s 10(38) of the Act. Thus, the view taken by the AO is pl view taken by the AO is plausible view which is supported by judicial decisions on this grounds also ausible view which is supported by judicial decisions on this grounds also the order u/s 263 fails. 9. Thus, respectfully following the decision of the Gitsh Tikmani HUF & Ors (supra) we hold Thus, respectfully following the decision of the Gitsh Tikmani HUF & Ors (supra) we hold Thus, respectfully following the decision of the Gitsh Tikmani HUF & Ors (supra) we hold that the impugned order passed u/s 263 of the Act dated 12.0 that the impugned order passed u/s 263 of the Act dated 12.02.2019 is bad in law and quash the 2.2019 is bad in law and quash the same. 10. In the result, the appeal of the assessee is allowed.” In the result, the appeal of the assessee is allowed.” 11. Applying the proposition of law Applying the proposition of law laid down in the cases as extracted above laid down in the cases as extracted above to the facts of the case on hand and considering the proposition of law laid facts of the case on hand and considering the proposition of law laid down in the case of down in the case of Manish Kumar Baid Vs. ACIT Manish Kumar Baid Vs. ACIT (supra) and Navneet Agarwal vs. ITO (supra) Navneet Agarwal vs. ITO (supra), wherein the genuineness of these transaction were upheld on the facts and circumstances of the case genuineness of these transaction were upheld on the facts and circumstances of the case genuineness of these transaction were upheld on the facts and circumstances of the case we hold that the revision of the assessment order u/s 263 of the Act, we hold that the revision of the assessment order u/s 263 of the Act, by the ld. Pr. CIT by the ld. Pr. CIT is bad in law. Hence we quash the order passed by the ld. Pr. CIT u/s. 263 of the Act on Hence we quash the order passed by the ld. Pr. CIT u/s. 263 of the Act on Hence we quash the order passed by the ld. Pr. CIT u/s. 263 of the Act on 20/03/2020 and allow these grounds of the assessee. 20/03/2020 and allow these grounds of the assessee.

Kolkata, the Kolkata, the 21st day of April, 2021.

Sd/- Sd/- J. Sudhakar Reddy] [Aby T. Varkey] [J. Sudhakar Reddy Judicial Member Accountant Member Accountant Member Dated: 21.04.2021 {SC SPS}

17 ITA No. 643/Kol/2020 Assessment Year: 2015-16 Hill Queen Investment (P) Ltd.

Copy of the order forwarded to: 1. Hill Queen Investment (P) Ltd Hill Queen Investment (P) Ltd Surobala Apartments Flat No. 202 3rd Floor Block-B Rekhjuani, Bhatinda Rajarhat Kolkata – 700 135