The Gauhati Bench of Income Tax Appellate Tribunal (ITAT) held that Principal Commissioner of Income Tax [PCIT] in his order has no where recorded about any investigation report or reports of other regulators in respect of the scrip dealt by the assessee therefore quashed the revisionary order under Section 263 of the Income Tax Act, 1961.
The assessee Mukesh Kumar Agarwalla is the owner of warehouses at Khanapara, Guwahati and has executed works contract during the period under consideration. Assessee filed his return of income on reporting total income at Rs.32,18,140/- the case of the assessee was selected for scrutiny.
In the course of assessment, assessee appeared and furnished copy of tax audit report in Form No. 3CB and 3CD, bank statement, computation of total income, Form 26AS as well as books of account including cash book and ledger with supporting bills, memos, vouchers which were test checked.
The Assessing Officer (AO) in the impugned assessment order noted that assessee had explained the mis-match of turnover in service tax return and Income Tax Return (ITR). He also noted that assessee had explained cash deposits and sale transactions in shares.
Subsequently, the PCIT on examination of the assessment records noticed that AO had not properly examined the issue of suspicious sale transaction in shares and exempt LTCG claimed by the assessee. He noted that assessee had claimed Long Term Capital Gain (LTCG) of Rs.97,21,494/- and exemption sought which has been allowed by the AO without required verification which ought to have been carried out by him. Accordingly, a show cause notice under Section 263 of the Income Tax Act,1961.
The PCIT held that the assessment order passed under Section 143(3) of the Income Tax Act by the AO is erroneous and prejudicial to the interest of revenue and directed him to make fresh assessment after proper and thorough verification of the sale of shares and LTCG arising therefrom.
Aggrieved by the order assessee filed an appeal before the Tribunal.
The Authorised Representative (AR) of the assessee S. P. Bhati, pointed that present case is a case where Ld. AO has made all the required examination of the records furnished before him in respect of transaction of sale of shares whereon LTCG was earned and claimed as exempt under Section 10(38) of the Income Tax Act.
The Departmental Representative (DR) placed reliance on the decision of High Court of Calcutta in the case of PCIT Vs. Swati Bajaj where similar issue was dealt therein relating to penny stock transactions which was held against the assessee.
The DR relied on the order of PCIT and submitted that no prejudice is caused to the assessee since PCIT has directed the AO to examine the issue afresh and pass the assessment order accordingly.
The Bench noted that the PCIT has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of the revenue, for passing the impugned order under Section 263 of the Income Tax Act.
It was observed that the matter cannot be remitted for a fresh decision to the AO to conduct further enquiries without a finding that the order is erroneous, the condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Income Tax Act. In such matters, to remand the matter/issue to the AO would imply and mean that the PCIT has not examined and decided whether or not the order is erroneous but has simply directed the AO to decide the aspect/question.
The Tribunal further observed that PCIT in his order has no where recorded about any investigation report or reports of other regulators in respect of the scrip dealt by the assessee to doubt its genuineness.
The Two Member Bench comprising of Rajpal Yadav, Vice President and Girish Agrawal, Accountant Member held that the issue raised by the PCIT in the revisionary proceedings, no action under Section 263 of the Income Tax Act is justifiable and therefore quashed the impugned order under Section 263 of the Income Tax Act and allow the grounds raised by the assessee.
Hence, appeal of the assessee was allowed.
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