NARENDRA KUMAR AGRAWAL,BURHANPUR vs. PCIT INDORE-1, INDORE

Per Vijay Pal Rao, JM:

This appeal by the Assessee is directed against the revision order dated 11.03.2024 of Pr. Commissioner of Income Tax passed u/s 263 of the Act for Assessment Year 2016-17. The assessee has raised following grounds of appeal:

“1 That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the Assessment order as passed by the Ld. A.O. U/s 147 of the Act on 28.03.2022 and invoking proceedings u/s 263 of the Act even when the said assessment order as passed by the

ITANo.345/Ind/2024 Narendra Kumar Agrawal A.O. was neither erroneous nor prejudicial to the interest of revenue. The present order as passed by the Ld. Pr. CIT u/s 263 without properly appreciating the facts of the case is wrong and bad-in-law. The same requires to be quashed. 2 That on the facts and in the circumstances of the case and in law the Ld. Pr. CIT erred in setting aside the Assessment order as passed by Ld. A.O. u/s 147 of the Act just to verify the claim of Short term Capital Loss from M/s Xpro Securities even when the reason for reopening the case of the appellant was to examine the loss of Rs. 32745549/- from M/s Xpro Securities only and moreso when the entire documents related to the said loss were duly filed by the appellant during the course of Assessment Proceedings and have duly been verified by Ld. AO after full application of mind. The present order so passed by the Pr. CIT by invoking the provision of section 263 of the Act is therefore illegal and bad-in-law. It is prayed that the same requires to be quashed.” 2. The assesse is an individual and filed his return of income on 25th September 2016 declaring total income of Rs.5,35,510/-. The case was selected for limited scrutiny through CASS and assessment was completed u/s 143(3) on 09.12.2018 accepting return income. Subsequently, the assessment was reopened by issuing notice u/s 148 of the Act on 26.03.2021 to assess the income assessable to tax has escaped assessment on account of fictitious loss booked by the assessee on F & O transactions through M/s Xpro Securities. The AO passed the reassessment order u/s 147 r.w.section 144B of the Act on 28.03.2022 accepting return income of the assesse. Thereafter on examination of the case record the Pr. CIT observed that the AO passed the order without making required inquiry/investigation which has resulted assessment order being erroneous in so far as prejudicial to the interest of the revenue. The Pr. CIT initiated the proceedings u/s 263 while issuing show cause notice dated 22.02.2024. The Pr. CIT Page 2 of 27

ITANo.345/Ind/2024 Narendra Kumar Agrawal then passed the impugned order whereby the order passed by the AO u/s 147 r.w.section 144B dated 28.03.2022 was set aside with the direction to make de-novo assessment and passed an order as per law after making necessary verification, inquiry and investigation. Aggrieved by the impugned order the assesse has filed the present appeal.

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ITANo.345/Ind/2024 Narendra Kumar Agrawal assessment order u/s 143(3) on 09.12.2018 accepting return income. Thus, Ld. AR has submitted that during the original scrutiny assessment the AO examined this issue and thereafter the assessment was reopened vide notice u/s 148 dated 26.03.2021. The assesse filed return of income in response to notice u/s 148 of the Act declaring the same income as declared in the original return of income after setting of business loss of Rs.3,56,04,837/-. Ld. AR has referred to the reasons recorded by the AO for reopening of the assessment and submitted that the only point of reopening of the assessment is the claim of loss of Rs.3,56,04,837/- from the F&O transactions carried out through M/s Xpro Securities was to be assessed tax by treating the same as fictitious entries of loss obtained by the assessee. During the reassessment proceedings the AO issued show cause notice u/s 142(1) dated 09.03.2022 which was replied by the assessee vide reply dated 15.03.2022. The assesse also produced the relevant supporting documents including copy of account of derivative transactions, ledger account of M/s Xpro Securities (broker) in the books of assessee, copy of contract note issued by M/s Xpro Securities during the reassessment proceedings. The AO after considering reply as well as documentary evidences was satisfied and again accepted the return income while passing order u/s 147 r.w. section 144B of the Act on 28.03.2022. Thus, Ld. AR has submitted that this issue was examined by the AO during the original security assessment as well as in the reassessment proceedings. The Pr. CIT initiated proceedings u/s

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ITANo.345/Ind/2024 Narendra Kumar Agrawal 263 by issuing show cause notice dated 22.02.2024 on the ground that the AO has not conducted a proper inquiry on this issue. Ld. AR has submitted that when the AO has raised specific quarries during the original assessment as well as solitary issue taken up during the reassessment and was satisfied with the reply and supporting documents filed by the assessee then the order passed by the AO cannot be held as erroneous for want of inquiry. The AO has passed the order u/s 147 r.w. section 144B of the Act with due application of mind on the issue reply filed by the assessee and supporting evidences therefore, the Pr. CIT was not justified in passing the impugned order holding order of the AO as erroneous as well as prejudicial to the interest of revenue for want of proper inquiry. Ld. AR has contended that there must be material available on record or called for by the Pr. CIT to satisfy himself that the order passed by the AO is erroneous being not in accordance with law or the same has been passed without making any inquiry. Ld. AR has submitted that every loss of revenue as consequence of the order of the AO cannot be treated as prejudicial to the interest of the revenue if the AO adopts one of the courses permissible in law and it has resulted in loss of revenue. Further where two views are possible and the AO has taken one view which the Commissioner does not agree it cannot be treated as erroneous or prejudicial to the interest of the revenue unless view taken by the AO is unsustainable in law.

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ITANo.345/Ind/2024 Narendra Kumar Agrawal 3.1 Ld. AR has further contended that the revisionary authority cannot step into the shoes of the AO and re-do assessment. In the case of the assessee the AO has taken view based on the facts and record produced by the assessee in respect of the loss incurred from the derivative transactions. The view taken by the AO based on the facts and record is a plausible view and such view cannot be held as erroneous and prejudicial to the interest of revenue so as to invoke revisionary jurisdiction u/s 263 of the Act. In support of his contention he has relied upon decision of Mumbai Benches of the Tribunal in case of Sir Dorabji Tata Trust vs. DCIT, (E) Circle 2(1) Mumbai 188 ITD 38. Ld. AR has also relied upon following decisions: (i) Malabar Industrial Co. Ltd. v. CIT reported in [2000] 243 ITR 83 (SC) (ii) CIT (Central), Ludhiana v. Max India Ltd. reported in [2008] 166 Taxman 188 (SC) (iii) CIT v. Sunbeam Auto Ltd. reported in [2011] 332 ITR 167 (Delhi) (iv) DIT v. Jyoti Foundation reported in [2013] 357 ITR 388 (Delhi)

3.2 Ld. AR has submitted that when the AO during the course of original assessment as well as reassessment proceedings made extensive inquiries and was satisfied with the correctness of the claim of the assessee then the order passed by the AO cannot be held as erroneous so far as prejudicial to the interest of the revenue for want of inquiry. Once the AO has already conducted inquiry twice during the original assessment as well as reassessment proceedings then the explanation (2) to section 263 cannot be

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ITANo.345/Ind/2024 Narendra Kumar Agrawal interpreted in a manner to make inquiries unending. Ld. AR has thus contended that when the AO has examined the issue, applied his mind and reached to a conclusion which is legally possible view then the commissioner cannot be invoke the provisions of section 263 merely, because he does not agree with the view of the AO. Hence, the AR has submitted that the impugned order passed by the Pr. CIT is not sustainable in law and liable to be quashed.

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ITANo.345/Ind/2024 Narendra Kumar Agrawal 5. We have considered the rival submissions as well as relevant material on record. The assesse filed his return of income on 25th September 2016 declaring total income of Rs.5,35,510/-. The case was selected for limited scrutiny through CASS and the AO issued show cause notice u/s 142(1) dated 19th June 2018 placed at page no.5 & 6 of the paper book as under:

“Notice under Sub Section (1) of Section 142 of the Income Tax Act, 1961 Sir/Madam/ M/s,

In connection with the assessment for the assessment year 2016-17 you are required to:

a) Fumish or cause to be furnished on or before 22/06/2018 at 11:30 AM the accounts and documents specified overleaf.

b) Fumish and verified in the prescribed manner under Rule 14 of 1.T. Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 22/06/2018 at 11:30 AM

c) The above mentioned evidence/information is to be fumished online electronically in 'E-Proceeding' facility through your account in 'e-filing' website of Income Tax Department.

d) Para(s) (a) to (c) are applicable if you have an account in e- filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not availablo).

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ITANo.345/Ind/2024 Narendra Kumar Agrawal e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually. Sd/- Yours faithfully,

SHRIPRAKASH SHARMA ITO, BURHANPUR ANNEXURE

5.1 Thus, the AO has raised specific quarries about the claim of short term capital loss of Rs.3,56,04,837/- arising from the transactions carried on stock exchange through the broker. The AO specifically asked the assessee to furnish details of cost of acquisitions with broker’s notes in respect of purchase of these securities. In reply dated 17th July 2018 placed at page no.7 & 8 of the paper book the assessee has stated as under: Page 9 of 27

ITANo.345/Ind/2024 Narendra Kumar Agrawal “You have claimed short term capital loss of Rs. 3,56,04,837/- on transfer of units of equity oriented (through stock exchange). Please furnish the details of cost of acquisition of units with broker's notes in respect of purchase of these securities. Pleas also furnish evidence with regards to the transfer of these units. The assessee carrying the business of F&O trading in which he suffered a business loss amounting to Rs. 3,56,04,837/- which was wrongly mentioned under short term capital loss by article clerk in return of income. The mistakes is deeply regretted. The assessee corrected this mistake by filing rectified return which is attached alongwith revised computation of income. Kindly consider the Rectified Return of Income and complete the assessment proceeding considering the revised return.” Attached in E-Proceeding:- Bank Accounts Details along with Bank Statements F&O Ledgers along with Broker's Notes and Rectified Return of Income and computation thereof Copy of Purchase and Sale Deed of Immovable Property.”

5.3 The assesse explained that he is carrying business of F&O trading in which he suffered a business of loss Rs.3,56,04,837/- which was wrongly mentioned under short term capital loss in the return of income. The mistake was then rectified by filing rectified return along with revised computation of income. After considering the said reply as well as supporting evidence comprising of details of derivative transactions, ledger, broker notes, and bank account statement the AO framed the assessment u/s 143(3) on 09.12.2018 accepting the return income. Thereafter the assessment was reopened by the AO vide notice u/s 148 dated 26.03.2021 and reasons recorded by the AO for reopening of the assessment are placed at page no.14E of the paper book as under:

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ITANo.345/Ind/2024 Narendra Kumar Agrawal “REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT

Assessee: NARENDRA KUMAR AGRAWAL

The assessee had filed his return of income for the AY 2016-17 declaring total income of Rs. 5,35,510/-. The case was selected for limited scrutiny and assessment was completed u/s 143(3) on 09.12.2018 accepting the returned income.

In this connection, information available in Insight portal shows that in pursuance to survey action u/s 133A by Investigation Unit Mumbai under Project Falcon, it was found that various brokers are engaged in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. One of such stock brokers admitted in his statement that he was engaged in providing fictitious losses/profit through BSE equity/derivative trading through his concern M/s Xpro Securities. As per information, the above assessee had booked fictitious losses through the concerned entity M/s Xpro Securities. On perusal of records with this office, it is observed that the assessee had booked fictitious losses from M/s Xpro Securities during the subject year aggregating to Rs. 3,27,45,549/-. Thus, I am satisfied that the income of the assessee has been under-assessed to this extent.

In view of the above, I have reason to believe that the income chargeable to tax to the tune of Rs. 3,27,45,549/- has escaped assessment within the meaning of section 147 of the Income-tax Act. Accordingly, notice u/s 148 of the I.T. Act is proposed to be issued to tax the above escaped income and also any other income chargeable to tax which has escaped assessment and which comes to my notice subsequently in the course of the proceedings under the said section.”

5.4 Thus, it is clear from the reasons recorded that the assessment was reopened by the AO to assess the income Page 11 of 27

ITANo.345/Ind/2024 Narendra Kumar Agrawal chargeable to tax on account of business loss claimed by the assesse arising from derivative transactions carried out at the stock exchange through M/s Xpro Securities as the said broker was found engaged in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. In response to notice u/s 148 the assessee filed its return of income declaring the same income as declared in the revised return filed during the course of original scrutiny assessment. Thereafter the AO issued show cause notice u/s 142(1) dated 09.03.2022 placed at page no.14F & 14G as under: “Notice under sub-section (1) of Section 142 of the Income Tax Act, 1961

Dear Taxpayer, Kindly refer to ongoing assessment proceedings in your case for A.Y. 2016-17 under Faceless Assessment Scheme, 2019. 2. We appreciate the anxiety and uncertainty that is facing all of us in the times of Covid-19. This communication is to assist you in ending one uncertainty, which is pending o-Assessment in your case for the Assessment Year 2016-17. 3. You are requested and required to kindly furnish or cause to be fumished on or before 16/03/2022 by 12:04 PM, the accounts and documents specified in the Annexure to this notice. 4. The accounts or documents, as mentioned above, are required to be submitted online electronically in E- proceedings' facility through your account in e-Filing website (www.incometaxindiaefiling.gov.in) Xxxxxxxxxxxxxxxxx ANNEXURE With respect to assessment proceedings, kindly furnish the following details:

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ITANo.345/Ind/2024 Narendra Kumar Agrawal

2 Details of all trading in stocks carried out by you during the financial year. Aiso furnish account statement of the demat account held by you for the relevant AY.

Ref: Assessee: Shri Narendra Kumar Agrawal 203,C.K. Campus Bahadarpur Road, Burhanpur(MP)

Α.Υ: 2016-17

PANo.: ADAPA01318

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ITANo.345/Ind/2024 Narendra Kumar Agrawal Status: Individual

With reference to above and as required by you the assessee submit herewith the following:

The Computation of Income for the Assessment Year under consideration is attached herewith for your kind perusal

There is no Details of trading in stocks carried out during the financial year. There is Futures and Options Trading which can be verified from Contract Notes which are attached herewith for your kind perusal. During the year under consideration. the assessee does not hold any demat account.

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ITANo.345/Ind/2024 Narendra Kumar Agrawal requested to shoto cause as to why the amount of Rs.3,27,45,549/- should not be added to your returned income.

The Assessee has entered into Derivatives Transactions through Broker M/s Xpro Securities and incurred losses. The Assessee has incurred losses of Rs.3,27,45,549/- for which the Assessee submits herewith the documentary proofs and supporting by way of Contract Notes and Ledger Copies and Bank Statements showing payments made by Official Channels. The preliminary objections to the reason to believe is already disposed off and its stated that Assessment is re-opened and it's a fact finding process whereîn all the facts will be gathered. Here, We have submitted all the facts and the documentary evidences for the Losses claimed.

Further, the Losses were also verified by the Assessing Officer and all records were submitted at the time of earlier Original Assessment. Though it was limited scrutiny but the Capital Gains where set off with the Losses of the Future and Options.

Now as the Losses are proposed to be disallowed it is the duty of the Department to prove how and on what basis/facts the losses are not allowable and addition is proposed. Just by stating that in Project falcon it is found that the entity with which the Assessee has dealt with is providing ficticious losses with M/s Xpro Securities. Further, stating that various brokers are engaged in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. The information or belief is one sided and now you can verify our records which clearly shows that all payments are made from normal banking channels and losses are paid for to the broker. There are no facts that the losses are provided to the Assessee. The Assessee has entered into genuine trades with the Broker. Without providing any information against the Assessee the Additions cannot be made and the Assessee must be given an opportunity to explain its stand as to the information available with the Department with regard to Assessee booking fictitious losses. Page 15 of 27

ITANo.345/Ind/2024 Narendra Kumar Agrawal The assessee had acted as a Bonafide trader and complied with all procedures and requirements of the stock exchange. At the time of relevant transactions/trades Assessee would not have any idea of any profit or loss in the said transactions of the futures and options. It may also be noted here that the stock market is a highly volatile market. The assessee filed complete documentary evidence before you and explained the facts of Futures and Options Trading. The assessee has also proved that all the transactions are carried out through the banking channel and as per guidelines issued by the SEBI by making payment of margin money and transactions are proved by contract notes. There is also no allegation made by BSE against any of the transactions carried out by the assessee company. The Futures and Options Trading System provides a fully automated trading environment for screen-based, floor-less trading on a nationwide basis and an online monitoring and surveillance mechanism. The system supports an order driven market and provides complete transparency of trading operations. Every day in the stock exchange crores of transactions is being done and each second hundreds of orders are placed for each stock. It may please be noted that any investor who enters into any transaction in the stock exchange does not know the details of a counter party to the transaction. In the screen-based transaction, the assessee enters his order which gets accepted by the stock exchange. The trading system of NSE and BSE ensures that neither the identity of counterparty nor the volume of transaction is known to anyone. We hope this will do the needful The assessee is willing and ready to furnish further information/explanation as may be required.”

5.6 Thus, the assessee produced all the details of the transactions resulting loss along with contract notes, ledger account, bank account showing payments through banking channels. The AO then

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ITANo.345/Ind/2024 Narendra Kumar Agrawal passed reassessment order u/s 147 r.w. section 144B on 28.03.2022 as under: “The assessee, NARENDRA KUMAR AGRAWAL, had filed his return of income for the AY 2016- 17 declaring total income of Rs. 5,35,510/-. The case was selected for limited scrutiny and assessment was completed u/s 143(3) on 09.12.2018 accepting the returned income.

5.7 The AO has specifically mentioned that in-compliance to notice u/s 148 the assessee has filed his return of income on 8th April 2021 declaring the same income, a notice u./s 142(1) was

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ITANo.345/Ind/2024 Narendra Kumar Agrawal issued which was duly replied vide reply dated 15.03.2022. After considering reply and details filed by the assessee the AO accepted the return income. It is a case of scrutinizing the return of income of the assesse twicely by the AO during the original scrutiny assessment as well as during the reassessment proceedings with specific queries on the same issue. Thereafter the Pr. CIT has issued show cause notice u/s 263 on 22.02.2024 placed at page no.45 to 47 of the paper book as under:

“M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings uls 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2016-17.

In this regard, a hearing in the matter is fixed on 29/02/2024 at 01:13 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link incometaxindiaefiling.gov.in

Please refer to the above.

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ITANo.345/Ind/2024 Narendra Kumar Agrawal booked fictitious losses through the concern M/s Xpro Securities during the FY 2015-16 relevant to AY 2016-17. Subsequently. assessment order u/s 147 r.w.s. 144B of the Income Tax Act 1961 (hereinafter referred as "Act") was passed on 28/03/2022 accepting the returned income.

Accordingly, considering the facts of the case as well as replies submitted by the assessee, on the basis of documents available on records, the assessment order u/s 147 r.w.s. 144B of Act was passed on 28/03/2022 accepting the returned income.

ITANo.345/Ind/2024 Narendra Kumar Agrawal reopening of case u/s 147. The Assessing Officer has not at all verified these issues and relevant facts involved therein while completing the assessment without any application of mind, without conducting proper inquiries and due verification. As such, the assessment is erroneous in the sense that it is prejudicial to the interest of revenue. You are therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of NFAC dated 28/03/2022 for A.Y 2016-17, is erroneous in so far as it is prejudicial to the interest of revenue.

5.8 The Commissioner has initiated the proceedings u/s 263 on the very issue of claim of loss from the derivative transactions carried out through M/s Xpro Securities. In para 5 of the show cause notice the Commissioner has stated that the AO has not at all verified these issues and relevant facts involved and completed assessment without any application of mind, without conducting proper inquiries and due verification. Therefore, the assessment

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ITANo.345/Ind/2024 Narendra Kumar Agrawal was found to be erroneous and prejudicial to the interest of the revenue. The Pr. Commissioner has referred the claim of short term capital loss as manipulated to reduced tax liability of long term capital gain. It is pertinent to note that in the return of income filed in response to notice u/s 148 the assesse has declared this loss as business loss arising from derivative transactions on stock exchange. Even in the reasons recorded by the AO for reopening of the assessment it is alleged that the broker M/s Xpro Securities is found engaged in in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. However, from the details of the transaction resulting loss in question as placed at page no.22 to 42 of the paper book it is found that most of the transactions are in the well-known scripts like Exide Industries, HCL technology, RECL, Voltas, BEML, Just Dial, Infosys, ACC Cement Ltd, Balaji Tally Films, Bata India Ltd. HPCL, IBHF, GMR Infra, L& T, AIHPC, etc.. Thus, it is clear that the scripts in which the assesse has carried out these derivative transactions are not illiquid scripts as alleged in the reasons recorded for reopening of the assessment but these are all well known, well traded scripts with high volumes on the stock exchange. Though the AO has not given any elaborate finding in the order however, it is manifest from the record available before the AO that after conducting inquiry he was satisfied with the reply and supporting evidences and consequently no disallowance was made. Once the AO was satisfied with the reply of the assesse, he was not required to give an

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ITANo.345/Ind/2024 Narendra Kumar Agrawal elaborate finding on issue. The Pr. CIT has doubted the claim of the assesse but has not conducted any independent inquiry or referred any material or details to show that the claim of business loss though wrongly referred by the Pr. CIT as short term capital loss is actually fictitious/bogus claim of the assesse. Merely because transactions of derivative segment carried out by the assessee during and after the transactions of sale of three properties would not epso-facto lead to the conclusion that the loss incurred by the assessee is fictitious loss. Rather it can be a case that once the assessee received the funds on account of transfer of properties he has carried out these derivative transactions. Therefore, in absence of any fact or material brought on record to show that the view taken by the AO is either contrary to the facts or to the law the initiation of proceedings u/s 263 is not warranted. It is pertinent to note that when the issue was already taken up for scrutiny twice by the AO during the scrutiny assessment u/s 143(3) and then in the reassessment proceedings u/s 147 r.w. section 144B of the Act then the Pr. CIT cannot again ask the AO to re-examine the issue which would be nothing but unnecessary harassment to the assessee to face an unending proceedings on the same issue. It is not a case of complete lack of inquiry on the part of the AO as manifest from the record that show cause notices were issued by the AO raising specific quarries on the this point which were replied by the assesse along with supporting evidences. Therefore, once the AO has conducted the inquiry on this issue and was satisfied with

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ITANo.345/Ind/2024 Narendra Kumar Agrawal the reply and explanation filed by the assesse along with supporting evidences then the order of the AO cannot be held as erroneous so far as prejudicial to the interest of the revenue on the ground of lack of inquiry or lack of proper inquiry. It is settled proposition of law that when the AO has adopted one of the courses permissible and available to him and this has resulted in loss to revenue or two views were possible and the AO has taken one view which the commissioner may not agree then the said order cannot be treated as erroneous or prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law. In the case in hand the Pr. CIT observed in para 6 of the impugned order as under: “6. It is worth to mention here that on perusal of the order sheet nothings, it can be observed that the AO has not neither conducted any enquiry to verify the aforesaid issue nor made any addition on the aforesaid issue to the total income of the assessee. Hence, the above referred issue related to claim of bogus short term capital loss through M/s Xpro Securities remained to be examined. Accordingly, the assessment order passed is erroneous in so far as it is prejudicial to the interest of the revenue.”

5.9 The above observation of Pr. CIT is contrary to the facts and record as available with the AO and referred in the forgoing part of this order which includes the show cause notice issued by the AO reply along with supporting evidences filed by the assesse. The Pr. CIT then set aside the order of the AO in para 11 of the impugned order as under: “11. Therefore, in view of the above discussion, I am of the considered opinion that the assessment order dated

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ITANo.345/Ind/2024 Narendra Kumar Agrawal 28/03/2022 for A.Y. 2016-17 is erroneous in, so far as it is also prejudicial to the interest of revenue on account of passing of the assessment order without making required inquiries and verification, which should have been made. Accordingly, I am satisfied that provisions of section 263 of Income Tax Act 1961 are required to be invoked. Therefore, the assessment for A.Y. 2016-17 framed on 28/03/2022 is hereby set-aside to the file of AO to re-examine the issue and to make de-novo assessment, indicated in the preceding discussion, u/s 263 and passing an order as per the law after making necessary verification, inquiries and investigations. It would be not out of place to mention that the AO shall re-examine only the issue which has been indicated for further investigation in the preceding discussion, after according due opportunities of being heard to the assessee.”

5.10 This find of the Pr. CIT clearly shows that he has set aside the matters of the record of the AO for re-examination of the issue and to make denovo assessment which means that the commissioner was also not certain about correctness of the claim of the assesse. This course of action on the part of the commissioner is not permissible when the AO has conducted inquiry twice and has taken view based on the material on record and therefore, the only course available with the Pr. CIT u/s 263 was to give a conclusive finding that the view taken by the AO is not sustainable under the law. The Hon’ble Delhi High Court in case of CIT vs. Sunbeam Auto Ltd. (supra) while dealing an issue of lack of inquiry and inadequate inquiry has held in para 12 as under: “12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Page 24 of 27

ITANo.345/Ind/2024 Narendra Kumar Agrawal Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. 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. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open.” 5.11 Similarly in case DIT vs. Jyoti Foundation (supra) the Hon’ble Delhi High Court has reiterated its view in para 4 as under: “4. Revisionary power under Section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because there visionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken.”

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ITANo.345/Ind/2024 Narendra Kumar Agrawal 5.12 Therefore, as it is evident from record that the AO has conducted an inquiry and was satisfied with the supporting evidences produced by the assesse in response to notice u/s 142(1) then it is not necessary for he AO to give an elaborate finding on the issue. The Pr. CIT while passing revision order cannot remand the matter back to the AO for fresh adjudication simply because he himself was not sure about correctness of the claim of the assessee. Accordingly in the facts and circumstances of the case when the order passed by the AO is not erroneous for want of inquiry then it is incumbent upon the Pr. CIT to give conclusive finding that the impugned order passed by the AO is not sustainable in law. Hence, following the various judgments on this point as relied upon by the AR and sited (supra) the impugned order of the Pr. CIT passed u/s 263 is not sustainable and the same is liable to be set aside. We order accordingly.

Order pronounced in the open court on 29 .08.204.

Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ 29 .08.2024 Patel/Sr. PS

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ITANo.345/Ind/2024 Narendra Kumar Agrawal Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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