The Tax Publishers2021 TaxPub(DT) 0003 (Ind-Trib)

INCOME TAX ACT, 1961

Section 263 Section 10(38)

Where assessee's case was selected for scrutiny for the reasons of suspicious transactions relating to long-term capital gains as earned on sale of shares and claimed exempt under section 10(38) and thereafter, the AO passed the assessment order under section 143(3) after making enquiry and recording assessee's statement under section 131, then Pr. CIT could not have invoked power of revision under section 263.

Revision under section 263 - Exemption under section 10(38) - Long-term capital gain earned on sale of shares - Validity

The scrutiny assessment of assessee wherein certain capital gains on listed shares were claimed as exempt under section 10(38), was reopened by the PCIT under section 263 citing that the AO had not carried out adequate enquiry on these penny stocks. This went up to ITAT for adjudication. The claim was: since it was a scrutiny assessment, the PCIT could not have invoked his powers under section 263. Held: Powers of revision under section 263 by PCIT can be invoked in each of the following circumstances :-- (a) Complete failure to conduct relevant enquiry; (b) Conducting enquiry but not taking it to its logical conclusion, and (c) Conducting enquiry but drawing the wrong conclusion. The Tribunal observed as follows: (i) Proper enquiry warrants relevant matters and information to have been sought. If this was missing, the case can be revised under section 263. (ii) Inadequate enquiry is as good as lack of enquiry. (iii) If the enquiry did not bring forth facts relevant to the point of revision, then it was certainly erroneous and prejudicial to the interests of the revenue. (iv) PCIT by invoking powers under section 263 does not overrun AO's jurisdiction under sections 142(1) and 143(2) -- he simply reviews facts if matters what has to have been enquired/scrutinized have been done or otherwise. So, recourse to section 142(1) or 143(2) is not available to demolish the revision under section 263. The reopening was incorrect on facts that the said capital gains on the underlying alleged penny stock shares was found to be genuine in another case of another assessee. The action of the Principal Commissioner revising the assessment order under the peculiarity of the facts and circumstances of the case could not be sustained.

REFERRED : Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC)

FAVOUR : In assessee's favour

A.Y. : 2014-15



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