SHRI CHETAN SHARMA,KANPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), KANPUR

PER ANADEE NATH MISSHRA, A.M.: These two appeals have been filed by the assessee against (A) the impugned appellate orders of learned Principal Commissioner of Income Tax, Kanpur [for short the 'PCIT'], each order dated 26.03.2019, for the assessment year 2014-15 & 2015-16. For the sake of convenience, these appeals are being taken up together and are being decided through this consolidated order. The grounds of appeal are as under:

2. That the Ld. Pr. CIT erred in holding that the AO had passed the assessment order dated 30.12.2016 without carrying out proper/adequate enquiry of certain alleged aspects of the matter. He failed to appreciate that the AO has considered the relevant aspects and the other aspects referred to by the Ld. Pr. CIT have no relevance.

& 344/LKW/2019 Page 2 of 20 3. That the findings given by the Ld. Pr. CIT in the impugned order dated 26.03.2019 overlooks the relevant facts and circumstances of the case and is based on facts and circumstances which are either irrelevant or non-existing rendering his order to be perverse and hence illegal and bad in law.” A.Y. 2015-16 1. That the Ld. Pr. CIT erred in assuming jurisdiction under section 263 of the Act without fulfilling the jurisdictional pre-conditions under the said section.

2. That the Ld. Pr. CIT erred in holding that the AO had passed the assessment order dated 30.12.2016 without carrying out proper/adequate enquiry of certain alleged aspects of the matter. He failed to appreciate that the AO has considered the relevant aspects and the other aspects referred to by the Ld. Pr. CIT have no relevance.

3. That the findings given by the Ld. Pr. CIT in the impugned order dated 26.03.2019 overlooks the relevant facts and circumstances of the case and is based on facts and circumstances which are either irrelevant or non-existing rendering his order to be perverse and hence illegal and bad in law.” (A.1) In Assessment Year 2014-15 (corresponding to appeal vide 30.12.2016 was passed by the Assessing Officer whereby the assessee’s total income was determined at Rs.59,58,580/-. The order was passed after approval of the Range Head under section 153D of the Income Tax Act, 1961 (hereafter referred to as the “Act”) granted vide office letter bearing F. No. JCIT(CR)/KNP/Approval under section 153D/2016-17/1533 dated 30.12.2016. In Assessment Year 2015-16, the assessment order dated 30.12.2016 was passed by the Assessing Officer whereby the assessees total income was determined at Rs.27,10,480/- after approval of Range Head granted vide his office letter bearing F. No. JCIT(CR)/KNP/Approval under section 153D/2016-17/1533 dated 30.12.2016. Vide separate orders, each dated 26.03.2019, passed under section 263 of the Act, the Ld. Principal Commissioner of Income (“PCIT” for short) set aside the aforesaid assessment orders for Assessment Year 2014-15 and Assessment Year 2015-16, with the direction to the & 344/LKW/2019 Page 3 of 20 Assessing Officer to pass fresh orders. In the aforesaid orders passed under section 263 of the Act, Ld. PCIT did take notice of the office note of the Assessing Officer wherein the Assessing Officer had appended the following note to both the aforesaid assessment orders in AY. 2014-15 & AY. 2015-16: - “The assessee has furnished the detailed reply along with documentary evidences with regard to the long-term capital gain along with copy of share transfer certificate, copy of bank statement, copy of D-mat account, which are placed on record and are verificable.” Inspite of the above stated categorical office note recorded by Assessing Officer, the Ld. PCIT took the view that the Assessing Officer failed to make inquiries about the assessees claim for Long Term Capital Gain, and passed the aforesaid orders under section 263 of the Act.

(A.2) At the time of hearing representative(s) of both sides agreed that the appeal for assessment year 2014-15 (corresponding to appeal vide Assessment Year 2015-16; as the facts and circumstances for the two Assessment Years are similar. For AY. 2014-15, the Ld. AR for the assessee drew our attention to written submissions filed in the course of appellate proceedings in Income Tax Appellate Tribunal, the relevant portion of which is reproduced as under: - “MAY IT PLEASE YOUR HONOUR This is an appeal made against the order passed by Ld. Pr.CIT u/s 263 of the LTax Act, 1961 dated 26-03-2019 in which Ld. Commissioner had remanded back the original assessment order passed by the Ld. AO u/s 153A of the I.Tax Act, 1961 In reference to the above, it is submitted as follows: Ground No.1, 2 & 3 As regards, Ground No. 1 regarding non fulfillment of jurisdictional preconditions the appellant has to submit as follows A. The whole revision proceedings u/s 263 of the I. Tax Act 1961 was initiated b the Ld. Commissioner only on the behest of the A.O. It is a settled law that Pr.CIT must independently examine the records and apply his own mind to ascertain whether the order is erroneous and prejudicial to the interest of the revenue. However, the impugned initiation of proceedings u/s 263 of the I.Tax Act, 1963 were solely on the request of the Ld. AO who had passed the original assessment order u/s 153A of the I.Tax Act, 1961 and on the basis of so called verification report by ITO-II, I & CI, Kanpur which was passed after the said assessment order was passed which indicates a lack of independent application of mind on behalf of Ld. CIT. A proposal from DCIT Central Circle, Kanpur to the Ld. Commissioner enclosed in Pg. No. 1 wherein the Ld. DCIT has itself enclosed the copy of report of ITO-II, I&CI and have requested the Pr. CIT to take remedial action against the assessee on the issue of long term capital gains on the shares sold. Also, on perusal of the order passed by Pr. CIT u/s 263 of the I.Tax Act, 1961, and plain reading of the of Para 2 at Page 1 of the order it is evident that the whole proceedings were initiated on the behest of the Assessing Officer. “It has been bought to the notice of the undersigned by the AO that the order passed u/s 153A of the I.Tax Act, 1961 by the Assessing Order is erroneous in so far as it is prejudicial to the interest of revenue in as much as the required enquiries have not been made to examine the inputs received from the investigating wing.” It has been held in various judgments that if proceedings u/s 263 are initiated on the behest of the AO without independent application and the order should be quashed. Hon’ble Kolkata ITAT in the case of M/s, Rupayan Udyog vs, Pr, CIT in ITA No, 1073/Kol/201 - Assessment Yea 2005 2005-06, order dt. 28.11.2018- “So from a bare reading of sec. 263 of the Act reveals that the Commissioner may call for and examine the record of any proceeding under the Act and if he considers that any order passed therein by the AO is erroneous in so far as prejudicial to the interest of the revenue, he may after giving opportunity of being heard to the assessee pass orders as prescribed under the Act. So, the power vested in the CIT is that of revisional jurisdiction to interfere with the order of AO, if it is erroneous in so far as prejudicial to the revenue and, therefore, the power to exercise the revisional jurisdiction is vested only with the Pr. Commissioner/Commissioner if he considers the order of the AO to be erroneous in so far as prejudicial to the interest of the revenue. Therefore, this power is vested with the Pr. CIT/CIT to exercise revisional jurisdiction is only when he considers that the order passed by the AO is erroneous in so far as prejudicial to the interest of the revenue and that power cannot be usurped by the AO to trigger the revisional jurisdiction vested with the CIT as per the scheme of the Act which gives various power to various authorities to exercise and they have to exercise powers in their respective given sphere which is clearly ear ear-marked and spelled out by the statute. Here, we note that the AO who is empowered by the Act to assess a subject within a prescribed time period has first assessed the assessee and later after passage of time has taken up a proposal with the CIT to exercise his revisional jurisdiction cannot be countenanced for the simple reason that when in the first place the AO noticing that he failed to properly enquire before assessing the assessee within the time limit prescribed by the statute cannot be allowed to get fresh innings to reassess ‘ because it was his duty to enquire properly within the time limit prescribed by the statute. Therefore, the very invocation of revisional jurisdiction on the proposal of the AO itself is bad in law and for coming to such a decision we rely on the decision of the Tribunal in the case of Shantai Exim Ltd. Vs. CIT (2017) 88 taxmann.com 361 (Ahd. Trib.) and the decision of ITAT, Mumbai Bench in the case of Ashok Kumar Shivpuri Vs. CIT for AY 2008 2008-09 dated 07.11.2014. Therefore, we find merit in the contention of the Ld. AR and we quash the very usurpation of jurisdiction u/s. 263 of the Act by the CIT. Therefore, the appeal filed by the assessee is allowed.” Also, similar view was taken by the Kolkata Bench of the Tribunal in the following cases 1. The West Bengal National University of Juridical Science vs. CIT (Exemption), Kolkata on 30.09.2020.

Assessment Year 2014 2014-15, order dt. 2014-15.

A review of the provisions of Sec 153A, Sec 153D and procedure for assessment makes it clear that the assessment order u/s 153A is already subject to approval by the Addl. Commissioner u/s 153D and discussed with the investigation wing in case of major deviation between the income estimated in the appraisal report and the income proposed to be assessed. If the orders already subject to review by two authorities, as explained above have to be reviewed again u/s 263, there would not be finality in the assessment proceedings. This will be against the observation of Hon’ble Bombay High Court in CIT vs Gabriel India Ltd (1993) 203ITR (BOM), wherein the Hon'ble High Court held that such an action is against the well accepted policy of law that there must be point of finality in all legal proceedings and that state issued should not be reactivated beyond a particular stage. No assessment can be made u/s 153A or u/s 153B by AO until and unless, the entire record of assessment and the issues arising during assessment are reviewed by JCIT/Addl. CIT and proposed assessment order is approved by him. Hence, approval u/s 153D from JCIT / Addl. CIT, tantamount to review by the next higher authority. Orders already reviewed cannot be reviewed again. The Hon’ble Jurisdictional High Court in the following cases has held that CIT would not be justified in interfering in the approval accorded by the Addl. CIT for framing assessment order: CIT vs. Dr. Ashok Kumar in Appeal No. 192 of 2000 CIT vs. Dr. Ashok Kumar in Appeal No. 163 of 2008 CIT vs. Dr. Ashok Kumar in Appeal No. 413 of 2012 CIT vs. Dr. Ashok Kumar in Appeal No. 414 of 2012 In all the aforesaid cases the Hon’ble Court at para 5.2 of the order observed as under: “In the last it is also relevant fact that the AO was fully alive about the facts of the case and that is why he got necessary approval of Addl. Commissioner before completing the assessment orders for all the assessment year and once that is not disputed by the Revenue than the CIT would not be justified interfering in the approval accorded by the Addl. CIT for framing assessment orders for the assessment years in question. On the basis of facts and circumstances of the case, I am of the opinion that the impugned order is liable to be quashed accordingly.” Further, the in case an order passed u/s 153A has been passed along with the approval of Addl. CIT, the same cannot be revised without having revised the approval/decision of the Addl. CIT u/s 153D of the Act. The impugned order has been passed u/s 263 of the Act without having revising the approval taken by the Ld. AO from the Ld. Addl. CIT. The same has been decided in the following judgments In Mumbai Bench of ITAT in Surendra L. Hiranandani Mumbai vs Pr Cit Cen 1 Mumbai on 14 Februa 2018 Para 25 “We find that assessment order u/s.143 r.w.s.153A of the Act was passed after getting approval of ACIT as per provisions of section 153D of the Act. We find that the order u/s.143A r.w.s. 153 of the Act cannot revise without revising the approval of ACIT. We find that as per the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Dr. Ashok Kumar in LT. Appeal No.192 of 2000 wherein it is held that the assessment order approved by the 23 ITA No3226-3232.M.17 A.Y.2008-09 to 201415 ACIT u/s.153D of the Act cannot subject to revision u/s.263 of the Act. The learned DR could not file any evidence to show that such permission was revised by ACIT in present case, therefore, CIT cannot revise the order passed by AO u/s.153 of the Act. As per section 153A of the Act.” Indore Bench of ITAT in Prakhar Developers P Ltd Indore vs The Pr CIT Central Bhopal on 5th January, 2023 stated - Para 13 “It is the submission of the Ld. Counsel for the assessee that since the order has been passed by the Assessing Officer after obtaining approval of the Addl. CIT u/s 153D of the I.T. Act, therefore, the Ld. CIT has no power to exercise his jurisdiction u/s 263 of the I.Tax Act, 1961....... Para 16we find that the order impugned passed by the PCIT under Section of the Act where under the order passed by the Ld. AO under Section 143(3) r.w.s. 153A of the Act has been sought to be revised is not sustainable due to lack of jurisdiction in invoking Section 263 of the Act by the Ld. PCIT for this particular reason that the order sought to be revised has already been passed by the Ld. ACIT upon prior approval from the ACIT, Indore under Section 153D of the Act and therefore, the same cannot be revised without having an revised decision and/or directions o the ACIT under Section 153D 0 the Act” The above order has been decided on merits in favour of the assessee before the Hon’ble High Court of Madhya Pradesh in of 2023 [2024] 162 taxmann.com 48 (Madhya Pradesh) Pune ITAT in Dhariwal Industries Ltd. v. CIT IT Appeal Nos.1108 to 1113 PUN of 2014 dated 23-12-2016 - “15. Since in the instant case also the Assessing Officer has passed the order after obtaining necessary approval from Addl. CIT u/s. 153D of the I.T. Act, therefore, respectfully following the above-mentioned decisions of the Coordinate Benches of the Tribunal we are of the considered opinion that the CIT has no power to revise the order u/s. 263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl. CIT u/s. 153D of the I.T. Act.” Pune ITAT in Ramamoorth Vs Principal Commissioner of Income Tax on 29 November, 2018- “Para 15 Since in the instant case also the Assessing Officer has passed the order after obtaining necessary approval from Addl.CIT u/s.153D of the I.T. Act, therefore, respectfully following the above-mentioned decisions of the Coordinate Benches of the Tribunal we are of the considered opinion that the CIT has no power to revise the order u/s.263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl.CIT u/s.153D of the I.T. Act.” In the jurisdictional ITAT Bench in Mehtab Alam Kanpur vs Asst. CIT Kanpur “We have also examined the judgment of the Hon'ble jurisdictional High Court in the case of CIT us. Dr. Ashok Kumar (supra) on an issue whether the assessment order was passed with the approval of the Addl. CIT and their Lordships have held that the Assessing Officer was fully alive about the facts of the case and that is why he got necessary approval of the Addl. CIT before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue, then the Id. Commissioner of Income-tax would not be justified in interfering in the approval according by the Addl. CIT for framing the assessment order and thus there was no case for setting aside the assessment order for the assessment years in question.”

Patna Bench of ITAT in G an Infrabuild Private Limited vs Principal Commissioner of Income-tax Central Patna “Thus, in the light of the settled judicial precedents referred supra and on our examination of the facts of the case including the enquiries conducted by the Id. Assessing Officer regarding the carried out during the impugned year as well as examining the seized material, and then getting necessary approval u/s 153D of the Act and also observing that the ld. Pr. CIT did not make any specific enquiry prior to assuming jurisdiction, find the impugned revisionary proceedings as bad in law and deserves to be quashed on account of the following: a) that when there is an approval u/s 153D of the Act, it has been held consistently by the Hon‘ble Courts (referred supra) that revisionary power u/s 263 of the Act cannot be exercised. b) even otherwise, without revising the order u/s 153D of the Act, and finding them to be erroneous and prejudicial to the interest of the revenue, revisionary powers cannot be invoked for the assessment order framed u/s 153.A/143(3) of the Act after getting approval u/s 153D of the Act. c) that when the Id. Assessing Officer has conducted detailed enquiry, examined the seized records, made necessary observations in the assessment order, referred to various statements filed by the assessee and having taken one of the legally permissible view, then in such circumstances, the revisionary powers cannot be exercised just on the ground that adequate enquiry has not been done. d) that revisionary proceedings cannot be held to be justified unless ld. Pr. CIT had carried out independent enquiry specifically dealing with the details in his possession, for the issues raised in the show-cause notice u/s 263 of the Act. e) that when the Assessing Officer, based on his observations and examination of records had made addition in the hands of another assessee, the Id. Pr. CIT without revising the assessment order of other assessee, which has been framed by the same Assessing Officer cannot revise the assessment order in the case of the assessee and directing to make the additions as the same would tantamount to double addition. f) that the finding on merit of the Id. Pr. CIT contains various mistakes as the documents referred are not for the assessment year in dispute and some of the documents are not belonging to the assessee.” Hyderabad Bench of ITAT in Trinity Infra Ventures Ltd v. DCIT IT Appeal Nos. 584 H d. of 2015 dated 4-12-2015 - “5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of Addl. CIT under section 153D of the I.T. Act and therefore such an assessment cannot be revised without revising the directions of the Addl. CIT under section 153D of the I.T. Act. The Ld. Counsel for the assessee, has relied upon the decisions of this Tribunal in the case of Ch. Krishna Murthy vs. ACIT, C.C.3, Hyderabad in ITA.No.766/Hyd/2012 dated 13.02.2015 and also the decision of Lucknow Bench of ITAT in the case of Mehtab Alam 288/Luck/2014 dated 18.11.2014 in support of this contention. He has also placed reliance upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Dr. Ashok Kumar in LT. Appeal No. 192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT under section 153D, cannot be subjected to revision under section 263of the I.T. Act. In view of the above decision also, we hold that the revision order under section 263 of the I.T. Act is not sustainable. Accordingly, we allow the grounds of the assessee.” Again, Hyderabad Bench of ITATin H. Krishna Murth v. ACIT IT Appeal No.766 (Hyd.) of 2012, dated 13-2-2015 - “Therefore, considered in the aforesaid perspective when it is a fact on record that both the addl. CIT while granting approval u/s 153D as well as Assessing Officer in course of assessment proceeding have examined the issue of deemed dividend u/s 2(22)(e) of the Act at the hands of assessee in relation to the advance shown in his name in the books of M/s VCPL and the view taken by Assessing Officer as well as addl. CIT can be considered as one of the possible views, assessment order cannot be treated as erroneous. More so, when assessment order has been passed in terms with section 153D of the Act and Id. CIT has not revised the directions of addl. CIT. In these circumstances, as one of the conditions of section 263 is not satisfied, the impugned order passed u/s 263 is not valid. Accordingly, we set aside the impugned order of learned CIT and restored the assessment order passed.” On bare perusal of the Show Cause Notice it will be clear that the Ld. Pr.CIT (Central) had already concluded at the time of the issuance of the Show Cause Notice itself that the AO had not carried out necessary enquiries and the order is erroneous and prejudicial to the interest of the Revenue. [Extract of the SCN dt. 27.02.2019 issued by Pr. CIT (Central) PB Pg. No........ ] “During the course of proceedings you were show caused as to why not the alleged non-genuine LTCG may be added to the income. A reply at the fag end of the assessment year dated 29.12.2016 was furnished by you and the AO without conducting any independent enquiries accepted the submission filed by you despite the fact that the case was selected on the basis of suspicious sale transactions in shares and exempt LTCG shown in return. The AO ignored the fact that the astronomical increase in share prices is against proportional increase in share market and against the intrinsic value of the share at the relevant time. The value of shares increased approximately 60 times within 18 months of purchase of shares. Still the AO did not carry out independent/IIIrd party verification/enquiries thereby, rendering the order erroneous in so far as it is prejudicial to the interest of Revenue.” D. The Principal Commissioner of Income Tax (Pr.CIT) issued an order under section 263 of the Income Tax Act, 1961, citing a report from ITO-II, & CI, Kanpur, alleging several companies were involved in a scheme of providing bogus long-term gains through the sale of shares by the assessee. However, this report was never presented to the assessee for rebuttal. Additionally, the Pr.CIT referred to a SEBI Show Cause Notice (SCN) dated 01-03-2018, which was issued to various entities allegedly involved in the said nexus. Despite this reference, the SCN did not mention the assessee or the companies to which the shares were sold. Yet, the Pr.CIT did not provide an opportunity for the assessee to address the relevance of this SCN to their case. These procedural lapses violate the principle of natural justice, which mandates to have the right to be heard and respond to all evidence considered against them. The failure to confront these crucial reports and notices deprived the appellant of a fair opportunity to contest the allegations on which the Pr.CIT's order under section 263 was based.

In conclusion, it is evident that the appellant was not afforded a proper opportunity to rebut the evidence forming the basis of the order. This lack of procedural fairness undermines the validity of the conclusions drawn in the order under section 263. Further, it has been decided in the Hon’ble Bench of ITAT Deputy Commissioner of Income Tax vs Shri Rajnikant Prabhudas Mandavia “the Hon'ble Supreme Court held that when statements of witnesses are made basis of demand, not allowing & DCIT vs. Shri Rajnikant Prabhudas Mandavia Asst. Years -2014-15 to 2016-17 - 16 - assessee to cross-examine witnesses is a serious flaw which makes order nullity, as it amounts to violation of principles of natural justice. Further, three Tribunals on similar set of facts and with reference to the very same share i.e. M/s Global In fratech and Finance Ltd. have decided the issue in favour o the assessee holding that the assessee was not engaged in bogus purchase and sale o shares Mukesh Sharma in ITA Number 6249/Mum/2018 Kaushalya Agarwal 194/Kol/ 2018 and Mangilal Jain 729/Kol/2018. It was also observed that the assessee sold the shares during the impugned Assessment Year (Assessment Year 2014-15), but trading in the said shares continued till January 2019, which is also a pointer to the fact that the instant shares were not sold only with a view to earn bogus capital gains. Further, in the cross examination, the brokers have given information on modus operandi in obtaining bogus capital gains, but the name of the assessee has not been specifically mentioned in the list of beneficiaries, and therefore simply because the assessee sold shares of a company coming in the list of alleged bogus companies identified by the Investigation Wing cannot lead to the inference that such shares were purchases and sold only to earn bogus long term capital gains.” On the perusal of the above orders, it can be safely inferred that once all the transactions have occurred through Recognized Stock Exchange and the name of the assessee is not in any of list of beneficiaries, nor in the list of persons involved in the price rigging nor any adverse material is on records against the assessee, the gains on sale of such shares cannot be termed as bogus. E. The Ld. AO has passed the relevant assessment order after appreciating all the facts, documents, replies submitted during the course of assessment proceedings and also after considering the material available on records, which was duly checked, verified and approved by the Ld. Addl. CIT and necessary approval u/s 153D of the Income Tax Act, 1961 was given for passing the assessment order. Thus, it cannot be said that the order was passed without conducting necessary enquiries also it has been held by Hon’ble Kolkata Bench of the ITAT in Satish Kumar Lakhmani vs Principal Commissioner of Income Tax-10, Kolkata and Hill Queen Investment (P.) Ltd. vs Principal Commissioner of Income Tax, Kolkata. Thus, when necessary approval has been granted which was not challenged by the Ld. Pr. CIT (Central), Kanpur thus, any order passed in violation of proper opportunity of being heard, without disturbing the approval of Ld. Addl. CIT Central and initiated on the behest of AO without independent application of mind relying on unrelated reports and orders without confronting the same with the appellant such assessment order is jurisdiction and should be quashed.” (A.2.1) The Ld. AR for the assessee further submitted at the time of hearing, that the assessment was completed with the approval & 344/LKW/2019 Page 11 of 20 of the Range Head. The Ld. AR for the assessee drew our attention to written submissions forming part of the paper book; wherein mention has been made of order of Hon'ble Allahabad High Court in the case of M/s. Dr. Ashok Kumar (in Appeal No. 192 of 2000, Appeal No. 163 of 2008, Appeal No. 413 of 2012 and Appeal no. 414 of 2012; in which at paragraph 5.2 of the order, Hon'ble jurisdictional High Court has held that Commissioner would not be justified in interfering with the approval granted by Range Head for forming assessment orders. The Ld. AR for the Assessee also drew our attention to orders of Mumbai Bench, Indore Bench Pune Bench, and Hyderabad Bench at ITAT; referred to in the written submissions filed from assessee’s side, and forming part of paper book, wherein it has been held that assessment order cannot be revised under section 263 of the Act, when the approval granted by the Range Head has not been revised by the Commissioner. In the present case, the approval granted by the Range Head has also not been set aside (or revised) by Ld. PCIT, it was submitted by Ld. AR for the assessee. It was also submitted by Ld. AR for the assessee that while giving approval no deficiency in the assessment order was pointed out by the Range Head. He also submitted the assessment was made in Central Charge of Income Tax Department; and that it is common knowledge that in Central Charges of Income Tax Department, the assessments are regularly monitored by Range Head and the PCIT and, if the Range Head or PCIT wanted particular inquiries to be made, they should have indicated the same to the Assessing Officer during the process of monitoring. He further submitted that search under section 132 of the Act was conducted in the case of the assessee; and further that it is common knowledge that Investigation Wing of Income Tax Department prepares a & 344/LKW/2019 Page 12 of 20 comprehensive ‘Appraisal Report’ which takes into account all the incriminating materials, statements seizures etc. and also suggests their estimate of undisclosed income, as well as suggested lines of further investigation to be conducted at the end of the Assessing Officer. He submitted that the Appraisal Report is approved by an officer of the rank of Principal Commissioner of Income tax. The Ld. AR for the assessee also submitted that if the Assessing Officer deviates from the Appraisal Report, he has to bring on record the reasons for the deviation; and in the present case, there was no deviation note on record which implies that all the lines of inquiry as suggested in Appraisal Report (duly approved by Principal Director of Income Tax an officer of the rank of the PCIT) have been duly considered by the Assessing Officer. He also submitted that the PCIT, in exercise of his jurisdiction under section 263 of Income Tax Act should not have gone beyond the lines of investigation suggested in the Appraisal Report because the Appraisal Report was approved by an officer of the rank of the PCIT. He also submitted that the issue on which moreover, he submitted that the show cause notice dated 1.3.2018 of SEBI on which the Ld. PCIT placed heavy reliance was not available before the Assessing Officer at the relevant time and, therefore, the assessment order cannot be said to be erroneous or prejudicial to the interest of Revenue, if, the material relied upon by the Ld. PCIT was not available with the Assessing Officer during the assessment proceedings. It was also pointed out by the Ld. AR that the above show cause notice dated 01.03.2018 of SEBI was not even in existence at the time when assessment order dated 30.12.2016 was passed. He took us through voluminous paper book to drive home the point that the Assessing Officer did make necessary & 344/LKW/2019 Page 13 of 20 inquiries even on the issues which are subject matter of order under section 263 of the Act.

(B.1) The Ld. AR for the assessee placed reliance on the case of CIT Vs. Gabriel India Ltd 203 ITR 108 (Bom).

(B.1.1) The Ld. CIT-Departmental Representative (DR) strongly supported the impugned order passed by the Ld. PCIT under section 263 of the Act. She contended that the Assessing Officer should have conducted deeper inquiries on the basis of materials available before him, especially the report of Investigation Wing of Kolkata, which is annexed with the order under section 263 of the Act.

(B.1.2) We have heard both sides. We have perused the materials available on record. The Assessing Officer, vide his notice dated 25.11.2016, had made inquiry regarding the Long Term Capital Gain claimed by the assessee. Again on 07.12.2016, vide order sheet of the assessment record, the assessee was asked to show cause why the Long Term Capital Gain should not be disallowed and added back to the income of the assessee. The assessee had furnished categorical replies to the statements of six persons recorded by Investigation Wing of Kolkata which was available before the Assessing Officer, which was duly considered by the Assessing Officer. The assessee submitted final reply on 29.12.2016, after which the Assessing Officer passed the assessment order. Further, in the office note of the assessment order, the Assessing Officer has categorically recorded the conclusion that the assessee had furnished detailed reply along with documentary evidences as regards Long Term Capital Gain which were placed on record and were verifiable. The exact words in the office note are: - “The assessee has furnished the detailed & 344/LKW/2019 Page 14 of 20 reply along with documentary evidences with regards to the long- term capital gain along with copy of D-Mat account, which are placed on record and are verifiable.” The assessment proceedings were under the monitoring of the Range Head and the assessment order was approved by the Range Head vide letter dated 30.12.2016, as recorded in the last paragraph of the assessment order. The show cause notice dated 01.03.2018 issued by the SEBI, on which having reliance has been placed by Ld. PCIT, was not available to the Assessing Officer when the assessment order dated 30.12.2016 was passed, and was not even in existence. The Act of the Ld. PCIT in the faulting the Assessing Officer and revising the assessment order under section 263 of the Act, on the basis of subsequent developments happening after the assessment order is passed (show cause notice of SEBI), is patently irrelevant. It is well-settled that when an order has been passed on the basis of irrelevant consideration, the order is to be held as perverse and unsustainable. The order passed by the Assessing Officer cannot be held to be erroneous on the basis of materials that came to surface subsequent to passing of the assessment order. Although, the Ld. PCIT states that show cause notice dated 01.03.2018 of SEBI was available in Public Domain on the internet, any materials indicating inquiry or adverse finding of SEBI was never brought to the notice of the Assessing Officer during the assessment proceedings. In paragraph no. 6.2 of the impugned order under section 263 of the Act, the Ld. PCIT has stated that whether the inquiry should have been made are actually made by AO or not; is primarily a question of fact. The Ld. PCIT has further observed and implicitly hinted that the Assessing Officer did not make inquiries should have been done. The fact that the assessment proceedings were under the & 344/LKW/2019 Page 15 of 20 monitoring of Range Head and the assessment order was approved by the Range Head, raises strong presumption that even the Range Head was satisfied with lines of investigation, and nature and scale of the inquiries made by the Assessing Officer before passing the assessment order. Further, no deviation note has been brought for our consideration by Revenue showing any departure from appraisal report prepared by the Investigation Wing of Income Tax Department, and reasons for such departure if any. Further, the Ld. AR for the assessee had drawn our attention in his submissions, that Commissioner cannot exercise jurisdiction under section 263 of the Act, when assessment has been made after obtaining approval of the Range Head as held by Hon'ble jurisdictional High Court in the case of CIT vs Dr. Ashok Kumar (supra). He has also drawn our attention to orders of various Benches of Income Tax Appellate Tribunal (referred to in foregoing paragraph (A.2.1) of this order) wherein it has been held that assessment order cannot be revised by Commissioner under section 263 of the Act unless approval granted by the Range Head in also revised (set aside) by the Commissioner. The question of fact whether the Assessing Officer made inquiries is hereby answered in the affirmative. This is not a case in which the Assessing Officer failed to make any inquiry. The Assessing Officer did make inquiries about the assessee’s claim for Long Term Capital Gain as detailed earlier; and the Assessing Officer has also categorically confirmed this is in the aforesaid office note referred to paragraph no. 6.2 of the impugned order. Therefore, it is held that the order of the Ld. PCIT holding the assessment order dated 30.12.2016 to be erroneous and prejudicial to interests of Revenue, is not supported by credible material and, therefore, is unsustainable.

& 344/LKW/2019 Page 16 of 20 (2.1.1) It is not in dispute that no incriminating material was found during search under section 132 of the Act conducted in the case of the assessee, in respect of the issue on which assessment order of the Assessing Officer has been set aside by Ld. PCIT in order under section 263 of the Act. There is no reference to any such incriminating material found during search under section 132 of the Act conducted in the case of the assessee either in impugned order under section 263 of the Act or in the assessment order. It is well settled by orders of Hon'ble Supreme Court in the case of PCIT Vs Abhisar Buildwell (P.) Ltd 149 taxmann.com 399 (SC) and Dy CIT Vs. U. K Paints (Overseas) Ltd 150 Taxmann.com 108 (SC) that no addition can be made in respect of the issues on which no incriminating material has been found during search under section 132 of the Act in the case of the assessee. Thus, impugned order of Ld. PCIT passed under section 132 of the Act is clearly inconsistent with this well settled principle laid down by Hon'ble Supreme Court.

(2.1.2) In the case of CIT v Max India Limited (2007) 295 ITR 282 (SC): it was held that when the Assessing Officer takes one of the two view permissible in law and which the Commissioner does not agree with and which resulted in a loss of Revenue, it cannot be treated as erroneous order prejudicial to the interest of Revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. In the case of Malabar Industrial Co. Ltd (2000) 243 ITR 83: it was held by Hon'ble Supreme Court that the Commissioner has to be satisfied of two conditions cumulatively, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the Revenue. If one of the absent, Hon'ble Supreme Court held, i.e. if the order of the Assessing Officer is either not erroneous or to the prejudicial to the Revenue, re-cours cannot be had to Section 263 of the Act. In the case of CIT v Gabriel India Ltd, 203 ITR 108 (Bom):

& 344/LKW/2019 Page 17 of 20 it was held by Hon'ble High Court that substitution of judgment of Commissioner for that of the Assessing Officer is not permissible under section 263 of the Act, unless decision of the Assessing Officer is erroneous and the order of the Assessing Officer cannot be termed as erroneous unless which is not in accordance with law. The Hon'ble Court further held that Section 263 of the Act does not permit substitution of the judgment of the Commissioner for that of the Assessing Officer who pass the assessment order, unless order of the Assessing Officer is erroneous. In the case of CIT v Land Infrastructure Development Projects Ltd (2013) 357 ITR 763 (Mad):

It was held by Hon'ble High Court that whether adequate inquiries were made by the Assessing Officer was pure and simple factual finding. It was also held that the assumption of revisional jurisdiction can be justified only on the basis of materials indicating that the order of the assessment was payable of erroneous and prejudicial to the interest of the Revenue. In the case of CIT vs Sunbeam Auto Ltd (011) 332 ITR 167 (Del): it was held by Hon'ble High Court that there are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. It was further held that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. The Hon'ble Court held if there is any inquiry even inadequate that would not by itself give occasion to the Commission to pass orders under section 263 of the Act, merely because he has a different opinion of “lack of inquiry” that action under section 263 of the Act would be open. In the case of CIT v Vikas Polymers (2010) 194 Taxman 57 (Del):

Hon'ble High Court held that mere lack of inquiry by Assessing Officer is not sufficient for revision under section 263 of the Act. In the case of CIT v Ganpat Ram Bishnoi 152 Taxman 242 (Raj): it was held that jurisdiction under section 263 of the Act cannot be invoked for making enquiries or to go into process of assessment again and again merely on basis that more enquiry ought to have been conducted to find to find something. Hon'ble Rajasthan High Court held in the case of CIT vs Mangilal Didwani 286 ITR 126 (Raj) that whether Assessing Officer has made proper enquiry with due application of kind or not, is not the domain of the CIT to judge and further held that the fact that the Assessing Officer has made enquiries is sufficient itself. In the case of CIT vs Arvind Jewellers, 259 ITR 502 (Guj):

Hon'ble Gujarat High Court held merely because the Assessing Officer had taken a particular view with which the Commissioner did not agree cannot form the basis for an action under section 263 of the Act. The Hon'ble Gujarat High Court applied the principles laid down by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd (supra).

In the case of Ratlam Coal Ash co. v CIT 171 ITR 141 (MP): it was held that the order under section 263 of the Act could not be made when the assessee had furnished requisite information and Assessing Officer completed the assessment after considering the facts. In the case of CIT vs Associated Food Products P. Ltd 280 ITR 377 (MP): it was held by Hon'ble High Court that jurisdiction under section 263 of the Act cannot be invoked merely on the ground that the assessment order was completed in a haste. In the case of Goyal Family Trust Vs. CIT 171 ITR 698 (All): it was held by jurisdictional High Court that merely because the assessment is brief and cryptic that itself would not be a case for revisional under section 263 of the Act. In the case of Hari Iron Trading Co. Vs. CIT 263 ITR 437:

Hon'ble High Court held that A bare perusal of the aforesaid provision shows that the Commissioner can exercise powers under sub-section (1) of section 263 of the Act only after examining “the record of any proceedings under the Act”. The expression “record” has also been defined in clause (b) of the Explanation so as to include the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and on assessee’s explanations are rejected and additional disallowances are made. As already observed, we have examined the records of the case and find that the Assessing Officer had made full inquiries before accepting the claim of the assessee qua the amount of Rs. 10 lakhs on account of discrepancy in stock. Not only this, he has even gone a step further and appended an office note with the assessment order to explain why the addition for alleged discrepancy in stock was not being made. In the absence of any suggestion by the Commissioner as to how the inquiry was not roper, we are unable to uphold the action taken by him under section 263 of the Act. Another fact which deserves mention in this case is that in response to the show cause notice, the assessee had raised a legal issue pointing out that the assessment in its case had been made under effective monitoring of the Commissioner of Income-tax and had been finalized with his approval. As already observed, the Commissioner of Income-tax has not bothered to examine the specific objections raised by the assessee in its reply in the impugned order and the Tribunal has rejected the same summarily by observing that the objections were not & 344/LKW/2019 Page 19 of 20 supported by any material. Both the authorities have failed to take the trouble of even referring to the assessment record. (3.) In view of the foregoing discussion, the impugned order dated 26.03.2019 of the Ld. PCIT passed under section 263 of the Act is set aside and the aforesaid assessment order dated 30.12.2016 of the Assessing Officer for AY. 2014-15 is restored. Following the same reasoning and in view of the foregoing paragraph no. (A.2) of this order, the impugned order under section 263 of the Act for Assessment Year 2015-16 is also set aside and the assessment order dated 30.12.2016 of the AO is restored as no material has been brought for our consideration by either side to persuade us to take a view in AY. 2015-16, different from aforesaid view taken in AY. 2014-15. These two appeals are disposed off in accordance with aforesaid directions.

In the result, both appeals are allowed.

Order pronounced in the open Court on 06/01/2025.