NARESH KUMAR BHARGAVA,JAIPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX -1, JAIPUR, JAIPUR

vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M.

Present appeal arises because the assessee is aggrieved by an order of the Principal Commissioner of Income Tax, Jaipur-1, dated 07/02/2024 [here in after ld. PCIT] for assessment year 2013-14 passed u/s. 263 of the Act. The said order of PCIT arose on account of the assessment order dated 30.09.2021 passed National Faceless Assessment Center, [ herein after referred as ld. AO].

2. The Grounds of the present appeal as raised by the assessee are as under :

“1. In the facts and circumstances of the case and in law, ld. Principal Commissioner of Income Tax has erred in assuming jurisdiction u/s 263 when the order of the ld. AO is neither erroneous nor prejudicial to the interest of the revenue. The action of the ld. Principal Commissioner of Income Tax is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263.

2. The assessee craves his right to add, amend or alter any of the grounds on or before the date of hearing.”

The buyer and seller parties are well planned in this transaction, as only in such scenario, the cash is assured to the buyer and sale proceeds of shares are assured in the bank account linked with the demat account of seller. There is conclusive evidence of bogus LTCG through synchronized trading was found in this search.

Further these evidences, revealed that the assessee is a beneficiary of bogus LTCG by making transactions in penny stock namely, Gujarat Meditech Ltd. Also, the assessee had purchased 190000 shares other penny stock company namely: M/s Safal herbs Ltd., amounting to Rs. 59,66,309/- during the F.Y. 2012-13.

The above transactions and investment in penny stock company were not verifiable from the return of income of the assessee. As such, after recording of 'Reason to believe', proceeding u/s 147 Commissioner of Income Tax-1, Jaipur, a notice u/s 148 was issued on 19.03.2020, which was duly served upon the assessee.

In response, the assessee filed return of income on 01.10.2020 declaring total income at Rs.2,48,270/-. Accordingly, notice u/s 143(2) of IT Act, 1961 dated 23.10.2020 was issued. Thereafter, through notice u/s 142(1) of IT Act, 1961 dated 08.02.2021, a copy of recorded 'Reasons to believe' was provided to the assessee.

During the course of assessment proceedings, various notices u/s 142(1) of IT Act, 1961 were issued to the assessee. In compliance, the assessee filed written submissions through E-filing portal which have been verified during assessment proceedings. The assessee is a retired Govt. Servant and getting pension. The assessee stated that he is engaged in share transactions and has shown capital gain thereof (Long term & Short term both) in his return of income. In response to query, the assessee submitted the copies of bills/invoices, Demat A/c statements, Broker's ledger A/c and bank statements, which are placed on records. During the course of proceedings, the details so furnished were examined by the ld. AO. After scrutiny of the return of income and the details furnished accepted at Rs. 2,48,270/- and thereby the assessment was completed.

4. On culmination of the assessment proceedings, the ld. PCIT called for the records for examination. As is evident from the order of the ld. PCIT she has not commented on the issue for which the notice u/s. 148 was issued but she went on examining the other details which were called for by the ld. AO during the re-opened assessment proceedings. While going through the assessment records the ld. PCIT noted the assessee filed partner’s capital account wherein the withdrawal of Rs. 69,05,000/- made by the assessee. The withdrawal so made and the corresponding bank statement has not been filed and therefore, the ld. PCIT was of the view that the assessee was liable to an addition of Rs. 69,05,000/- on account of undisclosed income earned from the other source.

She also observed that during the proceeding of assessment notice u/s. 133(6) of the Act was issued to M/s. HBL Securities Ltd., who submitted the bank statement in support of the transaction done with the assessee. On perusal of bank statement filed it was supporting bank statement of the transaction so reflected in that bank statement called for and placed on record u/s. 133(6) of the Act. Upon verifying the entries in the name of assessee appearing in the bank statement filed by M/s HBL Securities Ltd., totaling to Rs. 3,05,50,000/- [ credit and debit 16882000+13668000] same were found to have remained unexplained. At last she also noted that the assessee was director in some of the companies based on the internet search with the assessee had not disclosed in the return of income filed. Even though these issues were accepted in the re-assessment proceedings by the AO in the opinion of the ld. PCIT said order was erroneous and prejudicial to the interest of the revenue and therefore, proceeding was initiated by her as per provision of section 263 of the Act. To this effect a shows cause notice dated 13.03.2023 issued. Assessee replied to the show cause notice on 29.11.2023 challenging the proceeding on legal as well as on merits of the case and to this effect the assessee filed the evidence and various decisions to support the contentions raised before the ld. PCIT. Apart from this, the assessee also carried out in the “faceless manner” by the NFAC. Any faceless assessment is carried out with the Assessment Unit, Technical Unit, Review Unit and Verification Unit. The officer in the rank of Addl. CIT and the Principal Commissioner, are observing this process of assessment, there cannot be plea that the order passed has any error when the multiple layer involved in the faceless assessment. The submission of the assessee was considered in the order of the ld. PCIT, but she was of the view that the ld. NFAC failed to apply mind on the material available on record and failed to invoke the applicable provisions of law. Thus, relying on the decision of the Apex Court in the case of Malabar Industrial Limited Vs. CIT 243 ITR 83 she directed the ld. AO to make necessary verification, determine and finalise the assessment in accordance with the prevalent law.

5. Feeling dissatisfied, the assessee preferred the present appeal on the grounds as reiterated here in para 2 above. To support the grounds so raised the ld. AR appearing on behalf of the as to why the order of the PCIT deserves to be set aside; GROUND NO. 1 LD. PCIT ERRED IN ASSUMING JURISDICTION UNDER SECTION 263

1.1 Case of the assessee, for the captioned assessment year, was reopened by issuance of notice under Section 148. Thereafter, multiple notices/query letters, were issued to the assessee, during the course of such re-assessment proceedings.

1.2 Subsequently, after considering elaborate submissions made by the assessee, assessment order under Section 147, read with Section 144B, dated 30.09.2021, was passed by the National Faceless Assessment Centre, Delhi (“NFAC”), in a “faceless manner”. [PB: 1- 3]

2.1. In the notice issued under Section 263, ld. PCIT raked up following two issues, which are summarized hereunder: - 2.1.i Assessee was a partner in M/s NV and Company, a partnership the firm. During the year under consideration, addition to his capital account and drawings from the capital account were Rs. 8,80,000 and Rs. 69,05,000 respectively, which were not disclosed in his Income Tax Return. Further, no details, apropos such transactions were submitted, during reassessment proceedings. (“Issue No. 1”); 2.1.ii Assessee had not shown transactions undertaken with M/s HBL Securities Limited, amounting of Rs. 3,05,50,000, however the same were shown by M/s HBL Securities Limited. Details in this regard were not submitted during the course of re-assessment proceedings, by the assessee. (“Issue No. 2”)

Submissions, apropos, both the issues have been made subsequently.

3. CASE OF ASSESSEE REOPENED UNDER SECTION 148 – NFAC DUTY BOUND TO STICK TO THE ISSUE FOR WHICH REOPENING DONE

3.1. It is submitted that the present case of the assessee, for the captioned assessment year, was reopened under Section 147, and thereafter order was passed by the NFAC, accepting the returned income.

3.2. Reopening, in the present case, was done pursuant to information received from DDIT(Inv.)-1(3), Ahmedabad by Jurisdictional AO (“JAO”), as regards the transactions of sale of shares of Gujrat Meditech Limited and Safal Herbs Limited, undertaken by the assessee, for the year under consideration. Allegation was made at the time of reopening the case of the assessee, that the Long-Term Capital Gain (“LTCG”) earned by the assessee, on sale of such shares were bogus.

3.3. In this regard, detailed reasons were recorded by JAO, prior to reopening the case of the assessee. The same is enclosed herewith, as part of paper-book from Pages 4 to 6 [PB: 4-6].

3.4. Accordingly, the JAO/NFAC was only required to verify the factual position, along with the documentary evidences, in relation to the transactions of sale of shares of Gujrat Meditech Limited and Safal Herbs Limited, undertaken by the assessee.

3.5. Assessee, pursuant to the various notices issued, under Section 142(1), during the course of re-assessment proceedings, submitted all the relevant documentary evidences. After considering those evidences, the transaction of sale of shares of Gujrat Meditech Limited and Safal Herbs Limited of Rs. 4,00,105 and Rs. 59,66,309 respectively, wherein LTCG was earned by the assessee were found to be genuine and accepted. Accordingly, no additions were made in the order passed by the ld. AO/NFAC. Once having accepted the issue for which reopening was done, in the first place, NFAC did not have the jurisdiction to made additions apropos other issues.

3.6. It is a settled legal position that in case of reopening, the Assessing Officer has to strictly adhere to the issues at hand, for which 3.7. As per the provisions of Section 147, once the case of the assessee was reopened for bringing to tax any income that had escaped assessment, then the Assessing Officer had the power to assess or reassess such income, and also any other income chargeable to tax, which had escaped assessment and which came to the notice of the NFAC, during such reassessment proceedings. 3.7.i Thus, NFAC had not only the power to add income in relation to income which had escaped assessment, in the hands of the assessee, but also income in relation to any other income, found subsequently in the reassessment proceedings. 3.7.ii This legal position existed even though nothing was mentioned by the assessing officer, in relation to any other income found subsequently in the reasons recorded. [Explanation 3, to Section 147]. 3.7.iii However, if subsequently in the reassessment proceedings it is found that the escaped income, for which reasons were recorded, had not actually escaped assessment, then NFAC had no jurisdiction to bring to tax/assess income in relation to any other escaped income which found subsequently during the course of reassessment proceedings. 3.7.iv This is for the reason that in Section 147, it was specified that assessing officer may “assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to the notice subsequently in the course of proceedings…”. [Jet Airways (I) Ltd. [2011] 311 ITR 236 (Bomb HC), Ranbaxy Laboratories Ltd. [2011] 336 ITR 136 (Delhi HC)]

3.8. As setout above, in the present case, ld. PCIT assumed jurisdiction, under Section 263, in relation to “Issue No. 1” and “Issue No. 2”, which were not the subject matter, for which the case of the assessee was reopened.

3.9. Accordingly, if the issue for which the case of the assessee was reopened, that is verification of the genuineness of LTCG on sale of shares of Gujrat Meditech Limited and Safal Herbs Limited, was 11 Naresh Kumar Bhargava vs. PCIT found to be genuine and no additions were made, then subsequently there cannot be any other issue which could have been raked up by the Assessing Officer/NFAC.

3.10. Thus, ld. PCIT is totally incorrect in assuming jurisdiction in the case of the assessee, under Section 263.

3.11. The above mentioned legal position was submitted to the ld. PCIT, during the course of proceedings before her. However, without any basis, whatsoever, the same was ignored by ld. PCIT while passing the order under Section 263.

3.12. In the below mentioned decisions, under identical set of facts, wherein reopening was done and subsequently returned income was accepted, the reassessment order was held to be erroneous by the ld. PCIT, on issues which did not form part of the reasons recorded. Subsequently, the appellate proceedings, assumption of jurisdiction by ld. PCIT, under Section 263 was held to be illegal and not as per law 3.12.i Software Consultants [2012] 341 ITR 240 (Delhi High Court) 3.12.ii Prosperous Buildcon (P.) Ltd. [2024] 463 ITR132 (Delhi High Court) 3.12.iii Aishwarya Rai Bachchan [2022] 194 ITD 272 [ITAT Mumbai]

Accordingly, at the threshold level, jurisdiction assumed by ld. PCIT in the present case, apropos Issue No. 1 and Issue No 2 is illegal and not as per law and thus deserves to be dropped.

Without prejudice to above, following submissions may also be considered.

4.1. BACKGROUND 12 Naresh Kumar Bhargava vs. PCIT 4.1.i Assessee was partner in M/s NV and Company (“the firm”), during the year under consideration. Assessee introduced amount of Rs. 8,80,000 as part of his capital, and also had withdrawn amount of Rs. 69,05,000, during the relevant previous year. Summary of the capital account of the assessee in the firm, is set out hereunder for the sake of ready reference: - Amount Assessee's Capital Account in the Firm (In Rs.) Opening Balance 6,025,000 Add: Capital introduced during the year 880,000 Add: Share in Profit or Loss for the year 6,253 Less: Capital withdrawn during the year 6,905,000 Closing Balance 6,253

4.2. RE-ASSESSMENT PROCEEDINGS – QUERIES/SUBMISSIONS

4.2.i During the course of re-assessment proceedings, extensive queries were raised by the NFAC, as regards the transactions undertaken by assessee with the firm. Snapshots of the queries raised by the ld. AO/NFAC and replies filed by the assessee vide multiple notice and submissions respectively, are stated infra: -

4.2.ii Notice dated 30.09.2020 by NFAC: - NFAC had asked to produce copy of Bank Statements [PB: 7-8]

13 Naresh Kumar Bhargava vs. PCIT Against which, assessee submitted Bank Account Statements, maintained with Oriental Bank of Commerce, for the relevant previous year vide his submission dated 06.10.2020 [PB: 9-10]

4.2.iii Notice dated 26.08.2021: - Thereafter, NFAC had raised query with respect to huge credits received in the said bank account. [PB: 11-12]

Against which, the assessee submitted his reply vide letter dated 02.09.2021. Relevant screenshot of reply relevant to 4.2.iv Notice dated 23.09.2021: - Thereafter, ld. AO/NFAC had specifically asked to clarify the nature of transactions done with the firm [PB: 17-19]

Pursuant to such notice issued, assessee filed detailed submissions, dated 28.09.2021, explaining the transaction undertaken with the firm. Relevant screenshot of the submission

4.2.v In view of the above, assessee had submitted following documents, as regards the transactions undertaken with the firm, during the course of re-assessment proceedings before the NFAC: - • Income Tax Return of the firm, for the relevant previous year; • Computation of income of the firm, for the relevant previous year; • Audited Financial Statements of the firm, for the relevant previous year; • Bank Statement of the firm, highlighting the transaction made, during the relevant previous year; • Bank Statement of assessee, highlighting the transaction made with the firm, during the relevant previous year.

4.2.vi Thereafter, on verification of all the documentary evidences, NFAC took a conscious decision of not making any additions in the hands of the assessee, for the said “Issue No. 1”. Re- assessment Order was passed, without making any additions to the returned income of the assessee. 4.3. ISSUE RAISED IN 263 ORDER

4.3.i In the order, passed under Section 263, following has been specified by ld. PCIT, in relation to Issue No. 1: - • It can be seen from the Partner’s Capital account, that addition of Rs. 8,80,000 shown and drawings of Rs. 69,05,000 shown from the firm were not disclosed in the Income Tax Return by the assessee.

4.4. SUBMISSIONS APROPOS ISSUE NO. 1

4.4.i It is submitted that, while filing Income Tax Return, for the year under consideration, assessee was not required to provide any information in relation to the partnership firms, wherein, assessee was a partner. There was no entry to be made specifically in this regard, in the Income Tax Return Form, relevant for the year under consideration. Copy of entire Income Tax Return Form, for the relevant previous year, filed by the assessee, is enclosed at Paper Book Page 28-37. Thus, whatever assessee was required to disclose in the ITR Form, had been fully disclosed by him.

4.4.ii Further, assessee only earned income of Rs. 6,253, in the form of profit, from the firm. The said profit was also exempt in the hands of the assessee, in terms of Section 10(2A) of ITA.

4.4.iii As can be seen from above, assessee had submitted all the documents, during the course of re-assessment proceedings, which proved genuineness of transactions with the firm.

4.4.iv Accordingly, assessee had submitted not only his own bank statements showing these transactions, but also the bank statement of the firm, during the course of re-assessment proceedings.

In view of the above, as regards “Issue No. 1”, NFAC has passed the order after considering the evidences submitted and the factual position emerging out of those evidences. Accordingly, jurisdiction under Section 263 cannot be assumed in relation to “Issue No. 1”.

5.1. BACKGROUND 5.1.i During the year under consideration, assessee purchased and sold several listed securities. Assessee had also entered into transactions, in the nature of purchase and sale of listed securities, with the broker M/s HBL Securities Limited (“the broker”).

5.2. ASSESSMENT PROCEEDINGS – QUERIES/SUBMISSIONS

5.2.i During the course of re-assessment proceedings, extensive queries were made by the NFAC, as regards to the transactions undertaken by assessee with the broker. Snapshots of the queries raised by the NFAC vide notice dated 23.09.2021, are set out as under [PB : 17-19]: -

18 Naresh Kumar Bhargava vs. PCIT 5.2.ii Pursuant to such notice issued, assessee filed detailed submissions, dated 28.09.2021 [PB: 20-27], explaining the transaction undertaken with the broker. Relevant screenshot of the submission made is set out under: -

5.2.iii Thus, assessee had submitted following documents as regards to the transactions undertaken with the broker, during the year course of re-assessment proceedings: - • Ledger of assessee in the books of the broker, in respect to transactions executed, during the relevant previous year. • Income Tax Return of the broker, for the relevant previous year. • Computation of income of the broker, for the relevant previous year. • Audited Financial Statements of the broker, for the relevant previous year. • Bank Statement of the broker, highlighting the transaction made, during the relevant previous year. • Bank Statement of assessee, highlighting the transaction made with the broker, during the relevant previous year.

5.2.iv Thus, the aforementioned documents were thoroughly examined by the NFAC.

5.3. ISSUE RAISED 263 ORDER

5.3.i During the course of re-assessment proceedings, NFAC issued notice under Section 133(6) to the broker and received the broker’s bank statement in response thereto.

19 Naresh Kumar Bhargava vs. PCIT 5.3.ii According to ld. PCIT, bank statement of the assessee showing these transactions with the broker were not disclosed during the course of re-assessment proceedings.

5.3.iii Thus, according to ld. PCIT, addition of Rs. 3,05,50,000 [Total of Debit and Credit Entries of Rs. 1,68,82,000 and Rs. 1,36,68,000 respectively], should have been made to the income of the assessee

5.4. SUBMISSIONS APROPOS ISSUE NO. 2

5.4.i It is reiterated that NFAC after considering the evidences submitted by the assessee [as set out in Para. 4.2.iii above], made conscious decision of not making any additions to the returned income of the assessee.

5.4.ii In the order passed by ld. PCIT, at Page 3 and 4, a table has been reproduced by ld. PCIT, which is said to be the Bank Statement of the broker, showing transaction undertaken with the assessee. After referring to such table, also set out hereinafter, it has been stated that that bank statement of assessee showing these transactions were not submitted, during the course of re assessment proceedings: -

These transactions have been undertaken by some other Naresh Bhargava with the broker and not the assessee himself.

Transaction Other than the actually transactions specified undertaken by the on the left side, none assessee with the of the transactions broker, explained have been undertaken subsequently. by the assessee. These have been undertaken by some other Naresh Bhargava and not the assessee.

5.4.iii It is submitted that out of the transactions as specified above, assessee had only undertaken the below-mentioned transactions: - Dr Document Evidencing the same, as also PB Date (Amount) submitted during reassessment proceedings Reference 17.08.2012 13,50,000 • Ledger of Assessee in the broker’s Books 39 • Bank Statement of Assessee 40 31.08.2012 42,90,000 • Ledger of Assessee in the broker’s Books 38 • Bank Statement of Assessee 42 • Ledger of Assessee in the broker’s Books 38 18.01.2013 5,00,000 • Bank Statement of Assessee 41 • Ledger of Assessee in the broker’s Books 38 11.02.2013 9,22,000 • Bank Statement of Assessee 42

5.4.iv The transactions other than aforementioned transactions were not entered by the assessee, rather entered by some other customer of the broker whose name is also “Naresh Bhargava”.

5.4.v It has also been specified by ld. PCIT in the order passed under Section 263 that assessee is also Director in many companies such as B. Lodha Securities Limited, Bhargava Lodha Stock Brokers Private Limited etc.

• It was submitted before the ld. PCIT that the entire presumption was on a wrong footing. The individual, Naresh Bhargava, as was referred ld. PCIT, was some other individual and not the assessee himself.

5.4.vi The same can be verified from the portal of Ministry of Corporate Affairs, wherein, Naresh Bhargava details are mentioned. Snapshot of the same is as under.

PAN is different as mentioned by ld. PCIT in SCN

5.4.vii From the above, it is clearly discernable some other Naresh Bhargava holds Directorship, in the companies specified in the order passed by ld. PCIT. PAN of such Naresh Bhargava is ACGPB3112N. Whereas, PAN of the assessee is ACPPB7889R which is reflected in order passed by ld. PCIT and also in the reassessment order passed by NFAC.

5.4.viii Accordingly, ld. PCIT has considered details of some other Naresh Bhargava and not of the assessee.

5.4.ix Also, the transactions as have been considered by ld. PCIT, were not undertaken by the assessee with the broker, but by some other Naresh Bhargava.

23 Naresh Kumar Bhargava vs. PCIT The aforementioned factual position, along with the documentary evidences, were submitted to the ld. PCIT, by the assessee, apropos Issue No. 1 and Issue No. 2, however the same were, without any basis, ignored by ld. PCIT. 5.4.x Further, during the course of proceedings, before the ld. PCIT, affidavit of the other Naresh Bhargava, along with his Bank Statement, wherein the corresponding entries are appearing, were submitted. In the affidavit, the other Naresh Bhargava confirmed the transactions done by him with HBL Securities Limited. Further, he has also provided his Permanent Account and Director Identification Number, through which it could be concluded that the assessee was not the Director in the various companies, as mentioned in the order passed by ld. PCIT, under Section 263. Affidavit of other Naresh Bharagava, along with the supporting evidences, are enclosed in the Paper Book 64 to 87.

In view of the above, as regards “Issue No. 2”, NFAC has passed the order after considering the evidences submitted and the factual position emerging out of those evidences. Accordingly, jurisdiction under Section 263 cannot be assumed in relation to “Issue No. 2.

6. ORIGINAL RE-ASSESSMENT PROCEEDINGS – FACELESS MANNER

6.1. It is pertinent to note that the assessment in the case of assessee for the year under consideration was carried out in the “faceless manner”, by the NFAC. Any faceless assessment is carried out with Assessment unit, Technical unit, Review unit, Verification unit. Also, officers of level of Additional Commissioners are involved. The different units are headed by Principal Commissioner of Income tax. Accordingly, in a faceless regime, there cannot be a case of error of any kind being caused to the department, for the reason that there is application of mind by multiple officers of Department and not by a single officer.

7.1. Assessment order can be revised under Section 263 only if the twin conditions of “error in the order” and “prejudice cause to the revenue” coexist. Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd [2000] 109 Taxman 66 (SC) held that “…A bare reading of this provision makes it clear that the pre-requisite to 24 Naresh Kumar Bhargava vs. PCIT exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with 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 ITO 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)…” 7.2. From the exhaustive material, already on record, and the enquiries conducted by NFAC, it is abundantly clear that no prejudice, in any manner, was caused to the interest of the revenue: -

7.2.i Hon’ble Calcutta High Court in Dawjee Dadabhoy and Co. v. S.P. Jain [1957] 31 ITR 872 (Cal.) at page 881 has explained the meaning of the expression "prejudicial to the interest of the Revenue" the following terms: “..The words ‘prejudicial to the interests of the Revenue’ have not been defined, but it must mean that the orders of assessment challenged are such as not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. It can mean nothing else…”

7.2.ii G.R. Thangamaligai [2003] 259 ITR 129 (MAD.) “In the absence of any finding that there is loss of revenue, interference under section 263 of the Act was not justified.

7.2.iii Eveready Industries India Ltd [2020] 181 ITD 528 (Kolkata - Trib.) “…The Hon'ble Supreme Court, held that for invoking powers conferred by S.263; the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue…”

7.3. Where the assessee furnished the requisite information and the NFAC completed the re-assessment after considering all the facts, the order cannot be termed as erroneous. Reliance is placed on the following judicial pronouncements: -

25 Naresh Kumar Bhargava vs. PCIT 7.3.i CIT v Ratlam Coal Ash Co (1988) 171 ITR 141 (MP) 7.3.ii Ashok Kumar Parasramka v ACIT (1998) 65 ITD 1 (Cal) 7.3.iii CIT v Mehrortra Brothers (2004) 270 ITR 157 (MP) 7.3.iv CIT v Parameshwar Bohra (2004) 267 ITR 698 (Raj) 7.3.v Paul Mathews & Sons v CIT (2003) 263 ITR 101 (Ker) 7.3.vi CIT v Arvind Jewellers (2003) 259 ITR 502 (Guj) 7.3.vii CIT v Hastings Properties (2002) 253 ITR 124 (Cal) 7.3.viii CIT v Goal (JP) (HUF) (2001) 247 ITR 555 (Cal) 7.3.ix CIT v Amalgamations Ltd. (1999) 238 ITR 963 (Mad) 7.3.x CIT v Macneill Magore Ltd. (1998) 232 ITR 945 (Cal)

7.4. Where the NFAC has exercised the quasi-judicial power vested in it in accordance with law and arrived at a conclusion and such a conclusion cannot be considered erroneous simply because the Commissioner does not feel satisfied with the conclusion.

7.5. Provision of Section 263 no-where allows to challenge the judicial wisdom of NFAC or to replace it/his wisdom in the guise of revision unless the view taken by NFAC is not at all sustainable in law. Extent of enquiry can be stretched to any level by forcing the ld. AO/NFAC to go through the assessment process again and again this proposition is not authorized by the law. Reliance is placed on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Ganpat Ram Vishnoi, 296 ITR 292 (Raj.) wherein at Para 11 of the Hon'ble Court held as under: "Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something."

7.6. Above factual and legal position was submitted before ld. PCIT, during the course of proceedings before her [PB: 43 to 87]. However, the same has been ignored by her in her order passed under Section 263. 7.6.i Ld. PCIT simply mentioned at Page 15, of her order that NFAC/Assessing Officer, did not apply his mind on the material available on record and failed to invoke the applicable provisions of law. It has been further stated that the order was passed by the NFAC/Assessing Officer in a routine and casual manner, without verification of the issues discussed in the order under Section 263.

26 Naresh Kumar Bhargava vs. PCIT 7.6.ii It is here by submitted that ld. PCIT failed to bring out any evidence to prove that there was non-application of mind by the NFAC. Ld. PCIT has not been able to point out, based on the submissions made by the assessee before her, as to how the orders passed by the NFAC was erroneous. 7.6.iii As submitted above, the order passed by NFAC cannot be said to be erroneous. On the contrary, the factual position has been wrongly considered by ld PCIT, resulting into drawing erroneous conclusions.

In view of the above factual and legal position, ld. PCIT has grossly erred in assuming jurisdiction under Section 263. Thus, the entire such proceedings initiated by the ld. PCIT deserves to the quashed.”

Index

S. No. Particulars Page No. Reassessment order under Section 147 read with Section 1-3 1. 144B, dated 30.09.2021, for the relevant previous year. Reasons recorded for reopening by the Jurisdictional 4-6 2. Assessing Officer, for the relevant previous year. Notice dated 30.09.2020 issued by NFAC, during the course 7-8 3. of reassessment proceedings, for the relevant previous year. Submission dated 06.10.2020, submitted by the assessee, before NFAC, during the course of reassessment 9-10 4. proceedings, for the relevant previous year. Notice dated 26.08.2021 issued by NFAC, during the course 11-12 5. of reassessment proceedings, for the relevant previous year. Submission dated 02.09.2021, submitted by the assessee, before NFAC, during the course of reassessment 13-16 6. proceedings, for the relevant previous year.

27 Naresh Kumar Bhargava vs. PCIT Notice dated 23.09.2021 issued by NFAC, during the course 17-19 7. of reassessment proceedings, for the relevant previous year. Submission dated 28.09.2021, submitted by the assessee, before NFAC, during the course of reassessment 20-27 8. proceedings, for the relevant previous year. S. No. Particulars Page No. Income Tax Return Form, of the assessee, for the relevant 28-37 9. previous year. Ledger of the assessee in the books of Broker, for the period 38-39 10. under consideration. Bank Statement of assessee, for the relevant previous year. 40-42 11. Copy of the Written Submissions filed by the assessee before the ld. PCIT, during the course of proceedings under Section 43-63 12. 263 Copy of the Written Submission and Affidavit of other Naresh Kumar Bhargava, along with the enclosures filed before the 64-87 13. ld. PCIT, during the course of proceedings under Section 263.

Decision paper book Index

S. No. Particulars Page No. Order of Hon’ble Delhi High Court in case of Software 1 to 5 1. Consultants- [2012] 341 ITR 240 Order of Hon’ble Delhi High Court in case of Prosperous 6 to 10 2. Buildcon (P.) Ltd.- [2024] 463 ITR132 Order of Hon’ble ITAT Mumbai Bench in case of Aishwarya 11 to 14 3. Rai Bachchan [2022] 194 ITD 272 Order of Hon’ble Bombay High Court in case of Jet Airways 15 to 23 4. (I) Ltd. - [2011] 239 CTR183 Order of Hon’ble Delhi High Court in case of Ranbaxy 24 to 32 5. Laboratories Ltd. - [2011] 336 ITR136 reasons recorded for the re-opening stated that the case was selected for verification of long term capital gain based on the information received from the DDIT, Investigation-Ahmedabad.

There is no adverse observation, and she was satisfied with the conduct of the ld. AO on the issue for which the notice u/s. 148 was issued. But the ld. PCIT, went on examination of the other issues that the assessee is a partner in M/s. N V And Company and from where he has made drawings of Rs. 69,05,000/- and the assessee not submitted the bank statement. On this observation, the ld. AR of the assessee demonstrated that the assessee submitted the bank statement in response to notice dated 30.09.2020 on 06.10.2020. Again vide notice dated 26.08.2021 the nature of credit and debit was called for which the assessee supplied on 02.09.2021. In addition, the assessee filed a detailed reply on 28.09.2021 explaining the transaction undertaken by the assessee with the firm. Thus, the observation that the ld. AO has not verified this aspect of the matter misplaced the attention of the ld. PCIT. He [ the ld. AR ] then as regards the transaction recorded in the bank statement supplied by the HBL Securities Ltd., alleged not in the substantiated all the transaction undertaken by filling the date wise transaction details and broker ledger in the books of the assessee on 03.09.2021 which has been appreciated by the ld. NFAC. Thus, both the ledger submitted by the assessee and obtained by the ld. AO directly both were available before the ld. AO and he has made a conscious decision not make any addition and thus, the view of the ld. PCIT that the order is erroneous, is without appreciation of the facts. As regards the assessee director in other companies the ld. AR of the assessee submitted that on this aspect of the matter he placed on record before the AO an affidavit that the person though having similar name but is other person having separate PAN and the directorship in the companies is of that person and not of the assessee. The ld. AR of the assessee submitted that based on this information already on record demonstrated before the ld. PCIT that the order of the assessment was neither erroneous nor prejudicial to the interest of the revenue. The ld. AR of the assessee on the legality of the proceeding initiated by the PCIT has heavily relied upon the orders of the Hon’ble Bombay High Court and Hon’ble Delhi High Court, as quoted in the paper alleged is not error and therefore, the order of the ld. NFAC who exercised quasi-judicial power placed on record all the relevant material and that too is not prejudicial to the interest of the revenue the ld. PCIT cannot set aside to again for verification the way, she wanted to conduct and that too when all the aspects were also placed before her and she too did not record reasons for the same.

“..The words ‘prejudicial to the interests of the Revenue’ have not been defined, but it must mean that the orders of assessment challenged are such as not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. It can mean nothing else…”

37 Naresh Kumar Bhargava vs. PCIT Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act.”

Thus, respectfully following the view of Hon’ble High Court of Delhi, we are of the considered view that the case did not attract provisions of clause (a) or (b) to Explanation 2 of section 263 of the Act and thus, it is nothing, but a change of opinion, which is not permitted in the eyes of the law. In the light of the aforesaid discussion, we hold that the order of the PCIT is not in accordance with the provisions of section 263 of the Act as the twin conditions failed to be established in this case and therefore, we vacate the order of the PCIT passed u/s. 263 of the Act.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 11/06/2024