RAJNI JAIN,BATHINDA vs. PR.CIT(CENTRAL), LUDHIANA

आदेश/Order

PER BENCH: The above captioned four appeals are of the same family and by way of these appeals, the respective assessees have challenged the correctness of the order of Ld. Principal Commissioner of Income Tax, Central, Ludhiana (PCIT) pertaining to Assessment Year 2016-17, wherein, the Ld. PCIT has set aside the assessment orders passed by the Assessing Officer (AO) u/s 143(3) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) in respect of the captioned assessees and has held that the assessments, as framed by the Assessing Officer, were erroneous and prejudicial to the interest of revenue as the Assessing

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 3 Officer had allegedly framed the assessments without making the requisite

enquiries/verifications and without due application of mind by the Assessing

Officer. Since, the four appeals involve a common issue; they were heard

together and are being disposed of by this common order for the sake of

convenience.

2.0 At the request of the Ld. AR, the case of Shri Sanjay Jain, (ITA

NO.140/CHD/2021) is being taken as lead case. The following grounds have

been raised in this appeal by the assessee: 1. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has erred in assuming jurisdiction under section 263 of the Income Tax Act and thereby setting aside the order of AO completed under section 143(3) of the Act with the direction to make the assessment de novo.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 4

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 5 making detailed inquiries. The loans were also verified by the Investigating Wing during post search inquiry made after the search. As such, the observations of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the loans were not examined as per section 68 of the Income Tax Act are against the facts and circumstances of the case.

2.1 The Ld. AR submitted that in this case the return of income was

filed on 13.07.2016 along with the computation of income showing Salary

Income, Income from House Property, Short term capital gain on sale of gold

coin/s and on the sale of shares of ‘Spice Jet Ltd.’, Long term gain on transfer of

eligible equity shares of Virtual Global Education Ltd., {for which, the

exemption has been claimed u/s 10(36) of the Income Tax Act} and Income

from other sources, such as bank interest and interest from Royal Lifestyle

Jewellers, etc. It was further submitted that based on this computation of

Income, the Assessing Officer issued a notice u/s 142(1) of the Act along with a

detailed questionnaire and in response thereto the assessee had filed a detailed

reply. Our attention was drawn to the relevant pages in the Paper Book wherein

the copy of the ITR, Computation of Income, questionnaire issued by the AO

and the reply of the assessee along with the relevant annexures were placed. It

was submitted that in response to the questionnaire, the assessee had filed copy

of the ‘Demat Account’’, details of loans and advances received and given and

Capital gain report, etc.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 6 2.2 It was further submitted by the Ld. AR that, thereafter, the AO

issued another questionnaire wherein there was a specific query with regard to

the ‘Long term capital gain’ on sale shares of Virtual Global Education Ltd., for

which, the exemption had been claimed and also the justification of unsecured

loans was asked for. The Ld. AR submitted that again a detailed reply was given

by the assessee and it was brought to the notice of the Assessing Officer that,

though, the long term capital gain was surrendered during the course of search

for earlier assessment years, later on, it was retracted. Also, the ‘Annual Return’

of the company, namely Virtual Global Education Ltd. for Assessment Years

(AY) 2014-15 and 2015-16 had been submitted to the Assessing Officer along

with certain other connected documents, like ‘Demat Account’. It was

submitted that details of unsecured loans had also been furnished for the period

01.04.2009 to 31.03.2016 i.e. from AY 2010-11 to AY 2016-17, and the ledger

account of ‘Gold Coin’ for financial year 2015-16, showing the purchases, sales

and payment had also been submitted before the Assessing Officer. It was

submitted that all these transactions were through the banking channels.

2.3 It was further submitted by the Ld. AR that as regards the claim of

deduction u/s 57 of the Act, the same has been regularly claimed from AY

2011-12 to AY 2017-18 and in this regard our attention was drawn to copies of

the various assessment orders u/s 143(3) of the Act (which have been placed on

record as per pages 182 to 305 of Paper Book, along with computations of

Income in Paper Book-III). Our attention was drawn to the copy of computation

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 7 of Income for AY 2017-18, wherein, the deduction u/s 57 has been allowed,

after raising a specific query.

2.4 Our attention was also drawn to the copy of the order sheet entries

to substantiate that specific queries were raised by the AO in respect of long

term capital gain with the proceedings starting from 16.05.2017 and concluding

on 17.10.2017 and that the assessment was completed after due application of

mind by the AO and only after seeking the necessary approval u/s 153D of the

Act as mandatorily required.

2.5 It was submitted by the Ld. AR that subsequently, the Ld. PCIT

issued a show cause notice wherein he raised the issue with regard to the long

term capital gain on Gold Coin for Rs. 5580/- and also on unsecured loan and

income from house property. It was submitted that again the assessee submitted

the required details along with documentary evidences before the Ld. PCIT and

also demonstrated before him that the relevant information had been called for

by the AO in this regard too, which had been duly and satisfactorily responded

to by the assessee which would go to prove the assessee’s claim of deduction

u/s 57 of the Act and would also establish the identity, genuineness and

creditworthiness of the transactions relating to unsecured loans but Ld. PCIT

merely set aside the issues without specifying what more details were required.

Our attention was drawn to pages 162 to 174 of Paper Book-II, in order to

substantiate that all such details were perused by the Assessing Officer.

Similarly, for the Income from house property and Gold Coin, it was submitted

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 8 that each and everything was borne out from the computation of income and the

details submitted therein. The Ld. AR argued that the Ld. PCIT had merely set

aside the original assessment without assigning any reason and by ignoring the

voluminous details submitted before the AO and also subsequently before him.

Thus, in nutshell, it was argued that the assessment had been framed after

making due and dedicated enquiries and that the Assessing Officer has raised

specific queries, which proves application of mind by the AO and, therefore, the

proceedings u/s 263 were bad in law.

3.0 With respect to second assessee in the captioned appeals i.e. M/s

Sanjay Jain & Sons in ITA 141/CHD/2021, the Ld. AR referred to the grounds

of appeals which read as under:

That the learned Principal Commissioner of Income Tax 1. (Central), Ludhiana has erred in assuming jurisdiction under section 263 of the Income Tax Act and thereby setting aside the order of AO completed under section 143(3) of the Act with the direction to make the assessment de novo. 2. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has erred in assuming the jurisdiction under section 263 of the Income Tax Act by invoking the explanation 2 of section 263 of the Act without pointing out in which manner the inquiries or verification should have been made. 3. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that before allowing exemption on account of long term capital gain on sale and purchase of shares, the AO has made

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 9 detailed inquiries as required under law and also made inquiry regarding genuineness of the companies, therefore, the observations of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any inquiry regarding allowability of exemptions on account of long term capital gain is against the facts and circumstances of the case. 4. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that the assessment was made under section 143(3) of the Act by the AO after verifying the claim under section 57 of the Income Tax Act on account of payment of interest and also considering the history of the case that similar deduction has been allowed in the preceding six years for which the assessment has been made after search. Therefore, the finding of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any independent inquiries or investigation regarding the claim as per material on record shows that these expenses have no direct nexus with the taxable income is against the facts and circumstances of the case. 5. That the appellant craves to add or amend the grounds of appeal. 3.1 The Ld. AR submitted that in this case also, identical issue is

involved. It was submitted that in this case the return of income was filed by the

assessee on 13.07.2016 along with the computation of income as well as the

balance sheet and other particulars. It was submitted that in the computation of

Income at pages 2 & 3, long term capital gain on shares of ‘Hind Securities’

and ‘Virtual Global Education Ltd.’ have been duly disclosed and the

exemption has been claimed u/s 10(36) of the Act. It was submitted that details

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 10 with regard to date of acquisition, date of transfer, full value of consideration

and exemption having been claimed u/s 10(36) of the Act were given therein.

3.2 The Ld. AR further submitted that the. Assessing Officer had

issued notice u/s 142(1) along with detailed questionnaire as per evidence

placed at pages 7 to 9 of the ‘paper book’ including the issue with regard to

deduction u/s 57 of the Act. It was submitted that a specific query had been

raised by the AO requiring details of shares and Demat account for the purpose

of verifying capital gain. The Ld. AR drew our attention to the reply filed by the

assessee in response to the queries raised by the AO and submitted that all the

requisite information including copy of Demat Account, ‘capital gain report’

and ledger accounts of shares of Hind Securities and of Virtual Global

Education was filed before the AO.

3.3 The Ld. AR further submitted that, thereafter, the AO issued

another questionnaire specifically requiring the assessee to explain the long

term capital gain for which exemption had been claimed u/s 10(36) of the Act

and in response thereto the assessee had again submitted voluminous documents

including copy of shares dealt in by the assessee. Our attention was drawn to

copy the said reply which was placed in the paper book. With respect to the

AO’s specific query regarding unsecured loans, it was submitted that details of

‘unsecured loans’ for the AY 2016-17 had been filed along with confirmed copy

of account and the bank statement of one fresh credit in the name of Sh. Jaideep

Nayyar. It was also submitted that the annual report of the Company ‘M/s

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 11 Virtual Global Education Ltd.’, for AY 2014-15 and AY 2015-16 had also been

submitted.

3.4 Our attention was also drawn to the copy of the order sheet entries

to substantiate that specific queries were raised by the AO in respect of long

term capital gain with the proceedings starting from 16.05.2017 and concluding

on 17.10.2017 and that the assessment was completed after due application of

mind by the AO and only after seeking the necessary approval u/s 153D of the

Act as mandatorily required. Our attention was also drawn to the comments of

the Ld. Additional Commissioner of Income Tax, who, while granting approval

u/s 153D had mentioned that the seized records were discussed from time to

time and also full enquiry was conducted.

3.5 It was submitted that after the passing of the Assessment Order,

subsequently, the Ld. PCIT issued show-cause notice wherein he raised the

issue with regard to the ‘Long Term Capital Gain’ for which, the exemption u/s

10(36) had been claimed as well as the issue of deduction claimed u/s 57 of the

Act. The Ld. AR submitted that the assessee gave a detailed response to the

show cause notice demonstrating that the AO had conducted adequate enquiries

on both the issues mentioned in the show cause notice but the Ld. PCIT did not

give any thoughtful consideration to the submissions made by the assessee but

passed the impugned order in a summary manner, without any evidence on

record and on the basis of the fact that the assessee had been claiming

exemption u/s 10(36) of the Assessee in the earlier years and on the basis of the

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 12 surrender made in the earlier years (which was factually incorrect) setting-aside

the issue to the file of the Assessing Officer. It was submitted that on the issue

of unsecured loans as well as deduction claimed u/s 57 of the Act, the Ld. PCIT

set aside the issues to the file of the AO without appreciating the queries raised

by the AO in this regard as well as the replies filed by the assessee along with

the relevant evidences before the AO.

3.6 Similar arguments as in the case of Shri Sanjay Jain were advanced

before us and on the issue of unsecured loans, it was argued that no show cause

notice was given on the issue and, as such, the finding recorded by the Ld. PCIT

deserved to be quashed as without issuing show cause notice, no adverse

finding could have been given by the Ld. PCIT. Thus, in nutshell, it was argued

that the assessment had been framed after making due and dedicated enquiries

and that the Assessing Officer has raised specific queries, which proves

application of mind by the AO and, therefore, the proceedings u/s 263 were bad

in law.

4.0 With respect to the third assessee in the captioned appeals i.e. Smt.

Rajni Jain in ITA 142/CHD/2021, the Ld. AR referred to the grounds of appeals

which read as under:

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 13 143(3) of the Act with the direction to make the assessment de novo. 2. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has erred in assuming the jurisdiction under section 263 of the Income Tax Act by invoking the explanation 2 of section 263 of the Act without pointing out in which manner the inquiries or verification should have been made. 3. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that before allowing exemption on account of long term capital gain on sale and purchase of shares, the AO has made detailed inquiries as required under law and also made inquiry regarding genuineness of the companies, therefore, the observations of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any inquiry regarding allowability of exemptions on account of long term capital gain is against the facts and circumstances of the case. 4. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that the assessment was made under section 143(3) of the Act by the AO after verifying the claim under section 57 of the Income Tax Act on account of payment of interest and also considering the history of the case that similar deduction has been allowed in the preceding six years for which the assessment has been made after search. Therefore, the finding of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any independent inquiries or investigation regarding the claim as per material on record shows that these expenses have no direct nexus with the taxable income is against the facts and circumstances of the case. 5. That the appellant craves to add or amend the grounds of appeal.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 14

4.1 The Ld. AR submitted that in this case the return of income was

filed by the assessee on 13.07.2016 along with computation of income including

the balance sheet. He drew our attention to the computation wherein the Long

Term Capital Gain on sale of shares of ‘Hind Securities’ and ‘Virtual Global

Education Ltd.’ and the exemption claimed u/s 10(36) of the Act has been

mentioned. He pointed out that all relevant details with regard to date of

acquisition, date of transfer, full value of consideration and exemption having

been claimed u/s 10(36) have been given therein.

4.2 The Ld. AR further submitted that the Assessing Officer had issued

notice u/s 142(1) of the Act along with detailed questionnaire requiring the

assessee to explain the deduction u/s 57 of the Act as well as provide copies of

the Demat account, shares traded and the evidences in respect of capital gain

exemption and in response the assessee had submitted the required details. Our

attention was drawn to copy of the questionnaire as well as the reply thereto

placed in the paper book. It was submitted that the detailed reply of the assessee

along with the evidences was duly perused by the AO during the course of

assessment proceedings.

4.3 It was further submitted by the Ld. AR that subsequently, the AO

issued another questionnaire wherein a specific query regarding Long Term

Capital Gain was raised and the exemption claimed u/s 10(36) of the Act was

also required to be explained further.. The AO also required the assessee to

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 15 justify the ‘unsecured loans’. The Ld. AR submitted that in response, again a

detailed reply was given wherein it was mentioned to the Assessing Officer that

the offer was made for surrender of the capital gain for AYs 2013-14 & 2014-15

had been retracted. Also the specific information called for by the AO was also

provided. Our attention was drawn to the copy of the second questionnaire and

the reply thereto which had been placed in the paper book.

4.4 Our attention was also drawn to the copy of the order sheet entries

to substantiate that specific queries were raised by the AO and it was submitted

that the assessment was completed after due application of mind by the AO and

only after seeking the necessary approval u/s 153D of the Act as mandatorily

required. Our attention was also drawn to the comments of the Ld. Additional

Commissioner of Income Tax, who, while granting approval u/s 153D had

mentioned that the seized records were discussed from time to time and also full

enquiry was conducted.

4.5 Thereafter, our attention was drawn to the impugned order wherein

the copy of the show cause notice issued u/s 263 of the Act has been reproduced

and it was submitted that in the said reproduction only two issues were

mentioned that being Long Term Capital Gain and deduction u/s 57 of the Act

whereas in the original show cause notice issued and placed at Pages 71 to 73 of

the Paper Book there were two more issues i.e. one with regard to unsecured

loan raised from Swagat Trading and the other on account of ‘Income from

House Property’. It was submitted that, the Ld. PCIT has not given any adverse

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 16 finding with regard to the Income from House Property while passing the order

u/s 263. The Ld. AR submitted that the assessee gave a detailed response to the

show cause notice demonstrating that the AO had conducted adequate enquiries

on the issue of Long Term Capital Gain, exemption u/s 10(36) of the Act,

deduction u/s 57 of the Act as well as on unsecured loans but the Ld. PCIT did

not give any thoughtful consideration to the submissions made by the assessee

but passed the impugned order in a summary manner, without any evidence on

record and on the basis of the fact that the assessee had been claiming

exemption u/s 10(36) of the Assessee in the earlier years and on the basis of the

surrender made in the earlier years (which was factually incorrect) setting-aside

the issue to the file of the Assessing Officer. It was submitted that on the issue

of unsecured loans as well as deduction claimed u/s 57 of the Act, the Ld. PCIT

set aside the issues to the file of the AO without appreciating the queries raised

by the AO in this regard as well as the replies filed by the assessee along with

the relevant evidences before the AO.

5.0 With respect to the fourth assessee in the captioned appeals i.e.

Shri Tarun Jain in ITA 144/CHD/2021, the Ld. AR referred to the grounds of

appeals which read as under:

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 17 143(3) of the Act with the direction to make the assessment de novo. 2. That the learned Principal Commissioner of Income Tax (Central)) Ludhiana has erred in assuming the jurisdiction under section 263 of the Income Tax Act by invoking the explanation 2 of section 263 of the Act without pointing out in which manner the inquiries or verification should have been made. 3. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that before allowing exemption on account of long term capital gain on sale and purchase of shares, the AO has made detailed inquiries as required under law and also made inquiry regarding genuineness of the companies, therefore, the observations of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any inquiry regarding allowability of exemptions on account of long term capital gain is against the facts and circumstances of the case. 4. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that the assessment was made under section 143(3) of the Act by the AO after verifying the claim under section 57 of the Income Tax Act on account of payment of interest and also considering the history of the case that similar deduction has been allowed in the preceding six years for which the assessment has been made after search. Therefore, the finding of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any independent inquiries or investigation regarding the claim as per material on record shows that these expenses have no direct nexus with the taxable income is against the facts and circumstances of the case.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 18 5. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to appreciate the fact that the assessee declared short term capital gain of Rs. 4,650/-on purchase and sale of gold coins on the same da\ and taxable at the maximum rate of income tax. As such, the assessment made by the AO is not erroneous and prejudicial to the interest of revenue as observed by the learned Principal Commissioner of Income Tax (Central), Ludhiana 6. That the appellant craves to add or amend the grounds of appeal.

5.1 The Ld. AR submitted that the facts of this case are identical to the

facts in the case of Shri Sanjay Jain. It was submitted that in this case the return

of income was filed by the assessee on 13.07.2016 along with computation of

income including the balance sheet. He drew our attention to the computation

wherein the Short Term Capital Gain in respect of Gold Coin and Long Term

Capital Gain on sale of shares of ‘Spice Jet Ltd’, ‘Hind Securities’ and ‘Virtual

Global Education Ltd.’ and the exemption claimed u/s 10(36) of the Act has

been mentioned. He pointed out that all relevant details with regard to date of

acquisition, date of transfer, full value of consideration and exemption having

been claimed u/s 10(36) have been given therein.

5.2 The Ld. AR further submitted that the Assessing Officer had issued

notice u/s 142(1) of the Act along with detailed questionnaire requiring the

assessee to explain the deduction u/s 57 of the Act as well as provide copies of

the Demat account, shares traded and the evidences in respect of capital gain

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 19 exemption and in response the assessee had submitted the required details. Our

attention was drawn to copy of the questionnaire as well as the reply thereto

placed in the paper book. It was submitted that the detailed reply of the assessee

along with the evidences was duly perused by the AO during the course of

assessment proceedings.

5.3 It was further submitted by the Ld. AR that subsequently, the AO

issued another questionnaire wherein a specific query regarding Long Term

Capital Gain was raised and the exemption claimed u/s 10(36) of the Act was

also required to be explained further.. The AO also required the assessee to

justify the ‘unsecured loans’. The Ld. AR submitted that in response, again a

detailed reply was given wherein it was mentioned to the Assessing Officer that

the offer as made for surrender of the capital gain for AYs 2013-14 & 2014-15

had been retracted. Also the specific information called for by the AO was also

provided. Our attention was drawn to the copy of the second questionnaire and

the reply thereto which had been placed in the paper book.

5.4 Our attention was also drawn to the copy of the order sheet entries

to substantiate that specific queries were raised by the AO and it was submitted

that the assessment was completed after due application of mind by the AO and

only after seeking the necessary approval u/s 153D of the Act as mandatorily

required. Our attention was also drawn to the comments of the Ld. Additional

Commissioner of Income Tax, who, while granting approval u/s 153D had

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 20

mentioned that the seized records were discussed from time to time and also

full enquiry was conducted.

5.5 Thereafter, our attention was drawn to the show cause notice issued

u/s 263 of the Act wherein the Ld. PCIT has raised the issues of Short Term

Capital Gain, Long Term Capital Gain, exemption u/s 10(36) of the Act and

deduction claimed u/s 57 of the Act. The Ld. AR submitted that the assessee

gave a detailed response to the show cause notice demonstrating that the AO

had conducted adequate enquiries on the issue of Long Term Capital Gain,

exemption u/s 10(36) of the Act, deduction u/s 57 of the Act as well as on

unsecured loans but the Ld. PCIT did not give any thoughtful consideration to

the submissions made by the assessee but passed the impugned order in a

summary manner, without any evidence on record and on the basis of the fact

that the assessee had been claiming exemption u/s 10(36) of the Assessee in the

earlier years and on the basis of the surrender made in the earlier years (which

was factually incorrect) setting-aside the issue to the file of the Assessing

Officer. It was submitted that on the issue of unsecured loans as well as

deduction claimed u/s 57 of the Act, the Ld. PCIT set aside the issues to the file

of the AO without appreciating the queries raised by the AO in this regard as

well as the replies filed by the assessee along with the relevant evidences before

the AO.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 21 6.0 It was submitted by the Ld. AR that the factual matrix in all the

cases was identical in as much as the Ld. PCIT completely chose to ignore the

fact that the AO, in all the cases, had made proper and adequate enquiries and

the assessee had given proper responses in all the cases which were duly

supported by evidences and that it was only after considering theses evidences

and responses, the AO had completed the assessments and that too after

obtaining the necessary approval under the scheme of the Act. It was argued

that in all these appeals, the Ld. PCIT had merely acted on surmises and

conjectures and had completely ignored the record before him and, therefore,

the proceedings u/s 263 of the Act were bad in law and were liable to be

quashed. It was argued by the Ld. AR that where the Assessing Officer has

specifically raised queries during the assessment proceedings, which proves the

application of mind, then, such assessment proceedings cannot be held to be

erroneous and prejudicial to the interest of revenue in terms of section 263 of

the Act. Reliance was placed on the order of the Chandigarh Bench of this

Tribunal in the case of Shri Surinder Pal Singh in ITA No. 57/Chd/2021, vide

order dated 31.01.2022, wherein after examining the various case laws and the

latest judgments, the order as passed by the PCIT u/s 263 was set aside. The Ld.

AR also placed reliance on the following judicial precedents:

(i) Venkatesh Technokraft Pvt. Ltd., in ITA No. 1464/Chd/2018 (ii) Manisha Ajay Shah in ITA No. 3001/MUM/2019 (iii) Pramod Kasharichand Shah in ITA No. 43/SRT/2018

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 22 (iv) CIT vs. Anil Kumar Sharma reported in 335 ITR 83 Delhi-HC (v) CIT vs. Hindustan Marketing & Advertising Co. Ltd. reported in 341 ITR 180 Delhi-HC (vi) CIT Vs Late Shri Vijay Kumar Koganti reported in 195 DTR 428 Madras High Court. (vii) M/s DTE Exports Pvt. Ltd. Vs Pr. CIT (ITAT Visakhapatnam).

6.1 Reliance was placed on numerous other judicial precedents copies

of which have been enclosed in the paper book and the same have been taken on

record.

6.2 It was further contended by the Ld. AR that proceedings u/s 263

can be invoked only on the personal satisfaction of the Ld. PCIT and it was

brought to our notice that in the present cases the proposals u/s 263,were moved

by the AO to Ld. PCIT for invoking provision of Section 263 (copies of which

have been placed in the paper books of each assessee) and, thereafter, the Ld.

PCIT, on the basis of the said proposals, issued a notice u/s 263, and, thus, it

was argued that the observation of the Ld. PCIT in the impugned order that he

had occasion to peruse the assessment record is not correct. Reliance was placed

on the order of the ‘Amritsar Bench’ of the ITAT in the case of ‘Ambey

Construction’ in ITA No. 208/Asr/2017 vide order dated 07.05.2019, wherein

the order of the Ld. PCIT u/s 263 was quashed as having been passed on the

basis of the proposal given by the AO. Similar reliance was placed on the

following judicial precedents:

-Manish Chirani vs. PCIT in ITA No. 1161/Kol/2019

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 23 -John Galt International vs. PCIT in ITA No. 2155/Mum/2017

-Span Overseas Ltd. vs. CIT in ITA No. 1233/PN/2013

- Priyank Sharma vs. CIT in ITA No. 347/JP/2013

-Alfa Laval Lund AB Vs CIT (International Taxation) reported in 210 DTR 313.

6.3 The Ld. AR also argued that the impugned orders were liable to be

set aside on another ground also for the reason that the orders of assessment had

been passed on the basis of ‘approval’ given by the Addl. Commissioner of

Income Tax u/s 153D of the Act and that as per the order of the ‘Delhi Bench’

of ITAT in the case of .Pankaj Bansal in ITA No. 383/Del/2021 & Ors. it has

been held that without revising the order of the Addl. Commissioner of Income

Tax u/s 153D of the Act, no valid order u/s 263 could be passed by the Ld.

PCIT.

6.4 The Ld. AR concluded his arguments by submitting that the orders

of assessment in all cases were passed after making due enquiries, verification

and due application of mind by the Assessing Officer and, therefore, the orders,

as passed u/s 263 of the Act, by the Ld. PCIT deserved to be set-aside.

7.0 Per contra, the Ld. CIT (DR) at the very outset stated that no

balance sheet, trading account and profit & loss account have been filed in

respect of the companies whose shares have been traded by the assessees and on

which long term capital gain has been claimed to have been earned and,

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 24 therefore the genuineness of the transactions was doubtful. Further, the Ld. CIT

(DR) also submitted that no STT had been paid by the assessees. With respect

to the deduction u/s 57 of the Act and genuineness of unsecured loan/s, he relied

upon the order of the Ld. PCIT. With respect to the approvals u/s 153D of the

Act not having been revised, reliance was placed on the order in the case of

Kapil Mehta passed by the Delhi Bench of ITAT, bearing ITA No. 533/2021

vide order dated 11.10.2021 wherein, after considering the judgment in the case

of Pankaj Bansal (supra), finding has been given in favour of the revenue.

While supporting the order of the Ld. PCIT, the Ld. CIT DR vehemently argued

that the AO had failed to make the requisite enquiries in all the four cases and,

therefore, the assumption of jurisdiction u/s 263 of the Act and subsequent

setting aside of the assessments was legally valid and justified.

8.0 In rejoinder, the Ld. AR submitted that what more enquiries were

required to be made by the Assessing Officer has not been mentioned by the Ld.

PCIT and that he has merely set-aside the assessments in a summary manner

and nothing adverse has been pointed out by the Ld. PCIT of the details

furnished before the Assessing Officer. It was further brought to our notice that

STT stands paid as per the evidence/s furnished in the paper book and, thus, the

argument of the Ld. CIT (DR) on this context was not correct. Further, it was

argued that the Ld. CIT (DR) cannot substitute, what has not been mentioned in

the order u/ s 263 and that there was nothing in the show-cause notice/s issued

by the Ld. PCIT with regard to providing balance sheet/s, trading account/s,

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 25 profit & loss account/s of the companies whose shares have been traded by the

assessees.

9.0 We have heard the rival contentions and have also perused records

as well as the paper books filed by the assessees in support of their contention

that the AO had made adequate enquiries during the course of assessment

proceedings and further in support of their claim that the assesses had submitted

all relevant documents and evidences in response to the queries raised by the

AO in all the four cases. Undoubtedly, the four cases are identical on facts in as

much as the returns filed by the assessees were filed showing identical

transactions, the AO issued similar questionnaires, the Ld. PCIT also issued

similar show cause notices and the impugned orders were also passed on

identical reasoning. We have duly considered the assessment orders in all the

four cases and at the very outset it can be seen that all the issues which were the

subject matter of the show cause notices issued by the Ld. PCIT had already

enquired into by the Assessing Officer and he, after duly considering the

voluminous documents and evidences furnished by the assessees, reached a

conclusion after due application of mind. It is a matter of record that specific

queries were raised by the AO and voluminous details were filed in respect of

‘Long Term Capital Gain’. Complete details regarding unsecured loans were

also called for and duly furnished by the assessees. Similarly, details with

regard to sale and purchase of gold coin, income from house property and

deduction u/s 57 of the Act were duly called for by the AO and the assessees

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 26 made due compliance in this regard too. It is also not the case of the Department

that the assessees did not discharge their onus before the AO. It is also seen that

the claim/s u/s 57 of the Act have consistently been allowed in the earlier as

well as later assessment years by raising specific queries and no specific reasons

have been given for setting aside this issue to the file of the Assessing Officer. It

is also borne out from records that the offer for surrender on account of Long

Term Capital Gain for AY 2013-14 and 2014-15 had been retracted as is

evident from the Order of the ITAT in ITA Nos. 625 & 626/Chd/2019, placed at

Paper Book pages 1 to 40. Therefore, we are unable to concur with the view

taken by the Ld. PCIT that the AO had not conducted necessary enquiries prior

to the passing of the assessment orders. We also do not agree with the argument

advanced by the Ld. CIT DR that there was a non-application of mind on the

part of the AO.

9.1 At this juncture, it would be relevant to make a reference to the

judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Sunbeam

Auto Ltd reported in [2011] 332 ITR 167 (Del.) wherein the Hon’ble Delhi

High Court has ruled that one has to keep in mind the distinction between ‘lack

of inquiry’ and ‘inadequate inquiry’ and further if there was any inquiry, even

inadequate, that would not by itself give occasion to the Commissioner to pass

orders u/s 263 of the Act, merely because he has a different opinion in the

matter. It was further held by the Hon'ble Delhi High Court that if any

Assessing officer, acting in accordance with law, makes a certain assessment,

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 27 the same cannot be branded as erroneous by the Commissioner simply because,

according to him, the order should have been written more elaborately.

9.2 Similar were the observation of the Hon'ble Delhi High Court in

the case of ITO Vs. DG Housing Projects Ltd [2012] 343 ITR 329 (Del). In this

case, the Hon'ble Delhi High Court went on to observe that in case where there

is in-adequate inquiry but no lack of inquiry, the CIT must give and record a

finding that the order/enquiry made is erroneous and that this can happen only if

an inquiry and verification is conducted by the CIT. The Hon'ble Delhi High

Court in the case of ITO Vs. DG Housing Projects Ltd (supra) also held that in

most cases of alleged ‘inadequate inquires’ it will be difficult to hold that the

order of the Assessing officer, who had conducted enquiries and had acted as a

Investigator, is erroneous, without the CIT conducting verification /inquiry

himself. However, in the present cases, no such inquiry has been carried out by

the Ld. PCIT and he has simply directed the Assessing officer to carry out

detailed inquires. In our considered opinion, the Ld. PCIT, without making

further inquiries on his own account, has simply stated in the impugned orders

that the Assessing officer was required to make more inquiries. The Ld. PCIT

has not pointed out as to what further inquiries was the Assessing officer

required to make and as to how without those inquires the ordesr of the

Assessing officer were erroneous in so far as prejudicial to the interest of the

Revenue.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 28 9.3 Similarly, the Hon'ble Delhi High Court in the case of DIT Vs.

Jyoti Foundation [2013] 357 ITR 388 (supra) held as under:

“that inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called for. The inquiry should have been conducted by the Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the inquiry."

9.4 In the present cases also, the A.O. made the requisite enquiries,

therefore, these are not cases of no enquiry and if the Ld. Pr. CIT was not

satisfied with the enquiries made by the AO, he should have conducted the

enquiries himself to record the findings that the assessment orders were

erroneous and he should not have simply set aside the orders passed by the AO

directing him to conduct the further enquiries.

9.5 On identical issue, the Hon'ble Jurisdictional High Court in the

case of CIT vs. M/s Unique Autofelts (P) Ltd (2009) 30 DTR 231 (P&H) held

as under:

"5. From the finding of the Tribunal, it is clear that the assessee had given proper explanation by filing the necessary confirmations. In view of such a finding, the Tribunal rightly held that power under Section 263 of the Act could be exercised where view taken by an Assessing Officer was erroneous. While exercising such power, the Commissioner was bound to take into account all relevant

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 29 facts. If order invoking the said power proceeds on an erroneous assumption, the same could be set aside by the Tribunal. Finding of the Tribunal is not shown to be perverse. No substantial question of law arises."

9.6 Similarly, the Hon'ble Supreme Court in the landmark judgment

reported in the case of Malabar Industries vs. CIT (2000) 243 ITR 83 (SC) has

held as under:

“A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it is that the order of the Income-tax 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 Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, if is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 30 order of the Income-tax officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-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 Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law."

9.7 In the present set of cases, as we have already pointed out, the AO

asked the assessees to furnish the relevant details relating to Long Term Capital

Gain, Short Term Capital Gain, exemption u/s 10(36) of the Act, deduction u/s

57 of the Act and unsecured loans and the assessees furnished all the relevant

documents which were examined by the AO who has taken a possible view.

Therefore, it is our considered view that there was a due application of mind on

the part of the AO in all the four cases and adequate and proper enquiries had

been conducted by the AO in this regard and, therefore, the impugned orders

passed u/s 263 of the Act have no feet to stand on. We are also in agreement

with the argument of the Ld. Counsel that in the cases of Sanjay Jain & Sons

and Shri Tarun Jain bearing ITA No. 141/Chd/2021 and 144/Chd/2021 no show

cause notice u/s 263 was issued on account of unsecured loan and hence the Ld.

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 31 PCIT could not have exercised his jurisdiction to set aside the case on the issues

of unsecured loan in these two cases. Accordingly, we hold that the proceedings

u/s 263 of the Act were bad in law in all the captioned four appeals and we

quash the revisionary proceedings for the reason that the AO had made adequate

enquiries is all the four cases and further the Ld. PCIT had not conducted any

independent enquiry on his own before coming to an incorrect conclusion that

the assessment orders were erroneous as being prejudicial to the interest of the

revenue and were liable to be set aside.

9.8 Since we, have quashed the impugned orders passed u/s 263 of the

Act for the reasons as given in the preceding paragraphs, we are not inclined to

comment/adjudicate on the issue of requirement of revision of approval/s

obtained under section 153D of the Act. We are also not inclined to

comment/adjudicate on the issue of the Ld. PCIT having initiated the impugned

proceedings on proposal/s initiated by the Assessing Officer.

In the final result, all the four appeals of the captioned assessees are

allowed.

Order pronounced on 23.03.2022.

Sd/- Sd/- ( N.K. SAINI) (SUDHANSHU SRIVASTAVA) Vice President Judicial Member Dated : 23.03.2022 “आर.के.”

ITA Nos. 140 to 143-Chd-2021 Sh. Sanjay Jain and Others, Ludhiana 32 आदेशक���त+ल,पअ-े,षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु.त/ CIT 4. आयकरआयु.त (अपील)/ The CIT(A) 5. ,वभागीय��त�न1ध, आयकरअपील$यआ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar