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Facts
The assessee claimed exemption for long-term capital gain from sale of equity shares. The Principal Commissioner of Income Tax (PCIT) initiated revisionary proceedings under Section 263 of the Income-tax Act, holding that the Assessing Officer (AO) had not conducted proper inquiry or verification regarding these transactions.
Held
The Tribunal held that the PCIT had invalidly invoked Section 263 jurisdiction. The AO had indeed conducted inquiry, gathered evidence, and applied his mind to the issue before framing the assessment. The PCIT's disagreement with the AO's view, in a case where two views are possible, does not grant jurisdiction for revision.
Key Issues
Whether the PCIT validly invoked revisionary jurisdiction under Section 263 when the AO had conducted a preliminary inquiry and taken a possible view.
Sections Cited
263, 10(38), 143(3), 142(1), 143(2)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
These are the appeals preferred by different assessee against the revisionary orders of the Pr. Commissioner of Income Tax (hereinafter referred to as the “Ld. PCIT”] dated 14.01.2021, 27.01.2021 for the AY 2015-16.
Though the appeals relate to different assessee, as the facts, issues and circumstances in all these appeals are similar, hence, for the sake of convenience and brevity, we will take as our lead case and facts, issues are discussed in the following paragraphs.
03. The only issue raised is against the invalid exercise of revisionary jurisdiction u/s 263 of the Income-tax Act, 1961 (the Act) by ld. PCIT, thereby wrongly revising the assessment framed by the ld. AO u/s 143(3) of the Income-tax Act, 1961 (the Act), dated 08-9-2017.
The facts in brief are that the assessee filed the return of income on 27.09.2015, declaring total income at ₹4,31,550/-.The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and accordingly, the notices u/s 143(2), 142(1) and questionnaire were duly issued and served upon the assessee. The learned AO after taking into consideration the submissions and replies of the assessee, framed the assessment u/s 143(3) of the Act, vide order dated 08-9-2017, assessing the total income at ₹4,60,010 as against the returned of income of ₹4,50,590/-.
The learned PCIT on perusal of the assessment records observed that the assessee claimed exemption u/s 10(38) of the Act in respect of long-
It was further noted by the learned PCIT that third party verification with brokers and other parties were not done by the ld. AO and accordingly, genuineness of the transactions as well as the credentials of the stock brokers and veracity of the exemption u/s 10(38) of the Act could not be verified. Thus, the learned AO completed the assessment without making inquiries and verification in the matter. Accordingly, the assessment framed u/s 143(3) of the Act dated 08-09-2017 was held to be erroneous and prejudicial to the interest of the Revenue. Show cause notice was issued under section 263 of the Act, on 14.01.2021, which was replied by the assessee submitting that all the documents comprising audited balance sheet , profit and loss account, copy of purchase account, copy of sale account, indirect expenses, indirect income, bank statements were filed before the learned AO along with evidences of purchase and sale of shares and the AO, only after taking into account all these evidences and after due examination thereof, framed the assessment. Rejecting the submissions and contentions of the ld AR, the learned PCIT finally revised the assessment by passing the revisionary order u/s 263 of the Act dated 14- 01-2021 directing the learned AO to call for the documents for purchase and sale of shares and examine the claim of exemption u/s 10(38) of the Act with proper verification and inquiry in accordance with the provisions of law after affording reasonable opportunity of being heard to the assessee.
The ld. DR on the other hand strongly rebutted the arguments put forth by the ld. AR by submitting that no prejudice is going to be caused to the assessee with the exercise of jurisdiction u/s 263 of the Act as the assessee would be still heard in the set aside proceedings on all the issues.
We have heard the rival contentions and perused the materials available on record. We find that in this case, assessment was framed u/s 143(3) of the Act by the learned AO vide order dated 08-09-2017. We also find that the case of the assessee was selected for scrutiny under CASS and thereafter, notice u/s 143(2) dated 01-08-2016 and notice u/s 142(1) of the Act dated 28-04-2017 were issued to examine transactions in shares and claim qua exemptions from long-term capital gain showed in the return of income. The assessee replied the said notices and furnished all the details before the learned AO including the production of books of accounts. The learned AO accepted the plea of the assessee in the assessment framed vide order dated 08-09-2017. Now, the issue before us is whether the revision invoked by the learned PCIT u/s 263 of the Act is invalid or not. In this background, we note that even the allegation by the learned PCIT that no inquiry was conducted and evidences were called for qua these share transactions by the learned AO during the assessment proceedings. In our opinion the conclusion of the ld. PCIT appears to be not correct and is in fact contrary to the facts available in assessment records. We have been examined the documents furnished before us by the assessee and find that certified copies were obtained from the learned AO which comprised of the evidences qua the sale and purchase of shares and ledger copies of purchase and sale of equity shares. In other words, these evidences were part of the assessment folder. Thereafter, the conclusion drawn by the learned PCIT that the issue is not examined at all by the Learned AO is contrary to the facts available on record. We note that the Learned AO has examined this issue after calling for the information/details/evidences from the assessee, as this was the only reason for selection of scrutiny of
Even there are the evidences on record that the learned AO has called for the evidences from the assessee and assessee has duly supplied the same. Then it is to be presumed that assessment is framed after taking into account all these evidences and it is not necessary that the learned AO to specifically mention in the assessment order about the correctness of these evidences as the learned AO cannot deal with each and every aspect in the assessment order.
Also, where two views are possible on the issues and AO has taken one of the possible views, then the jurisdiction u/s 263 of the Act is not available to the PCIT on the ground that he does not agree with the view taken by the learned AO and to substitute his own view by setting aside the assessment order. In our opinion, the ld PCIT can invoke the provisions of section 263 of the Act, if the view taken by the AO is not in accordance with the provisions of the Act or there is incorrect assumption of facts by the AO and not otherwise.
Considering the facts and circumstances of the assessee’s case and in the light of ratio laid in the aforesaid decisions, we are inclined to hold that the revisionary jurisdiction u/s 263 of the Act has been invalidly invoked by &21/KOL/2021 013. The issue raised in these appeal is similar to one as decided by us in ITA No. 18/KOL/2021(supra). Accordingly, our decision in would, mutatis mutandis, apply to these appeals of assessee as well in ITA Nos. 17,20 & 21/KOL/21. Hence, the appeals of assessee are allowed.
In the result, the appeals of the assessee are allowed.
Order pronounced in the open court on 15.10.2025.