Income Tax Appellate Tribunal - Chandigarh
Pargat Singh vs Income Tax Officer [Alongwith Ita Nos. ... on 25 April, 2005
Equivalent citations: (2005)95TTJ(CHD)295
ORDER
Possible viewFrom sale of shares the assessee earned long-term capital gains and claimed exemption under section 54F on investing the said gain in construction of house property. The AO, after detailed enquiries allowed the exemption. Subsequently, the assessment was reopened by the AO and certain addition for household expenses and difference in cost of construction, etc., are made. The CIT invoked section 263 and set aside the assessment.
Held: Exemption under section 54F was allowed after detailed enquiries, proper verification and examination of records available by the assessing authorities, the revision under section 263 without giving reasons was not justified as the AO had taken a possible view.
Income Tax Act, 1961 s.263 Income Tax Act, 1961 s.54F ORDER N.K. Saini, A.M.
1. All these appeals by the assessees are directed against the consolidated separate orders of learned CIT each dt. 13th Oct., 2004, in respect of each assessee. A common issue is involved in all these appeals which were heard together so, these are being disposed of by this consolidated order for the sake of convenience.
2. In all these appeals, common grounds raised read as under:
"1. That the learned CIT, Patiala, has erred in passing an order under Section 263 of IT Act, 1961.
2. That the assumption of jurisdiction by the CIT under Section 263 of IT Act is bad in law and the order as passed by the CIT, Patiala, under Section 263 on this ground alone deserves to be quashed.
3. Notwithstanding the above said grounds of appeal, the passing of order under Section 263 of IT Act is otherwise not sustainable."
3. First I will deal with ITA Nos. 1111 to 1114/Chd/2004 in the case of Shri Pargat Singh.
4. The facts of the case in brief are that the assessee filed returns for asst. yrs. 1996-97 to 1999-2000 on 31st Oct., 1996, 28th Oct., 1997, 31st Oct., 1998 and 29th Nov., 1999, respectively. All the returns were processed under Section 143(1)(a) of IT Act and subsequently the assessment for the asst. yr. 1997-98 was also completed under Section 143(3) of IT Act. Later on the AO received a copy of inquiry report in the case of Shri Ran Singh Kalsi, father of the assessee from DDIT (Inv), Patiala. On the basis of above said report, the AO reopened the case of the assessee under Section 147 of IT Act and issued notices to him under Section 148 of IT Act for the abovementioned assessment years. The assessments had been completed for all the assessment years under Section 143(3) of IT Act vide order dt. 1st March, 2004. The AO accepted the returned income for the asst. yr. 1996-97 and for asst. yr. 1997-98 the income already assessed under Section 143(3) in February, 1998 was accepted while additions of Rs. 14,000 and Rs. 40,000 had been made in the asst. yrs. 1998-99 and 1999-2000, respectively. In the asst. yr. 1998-99, addition was made on account of household expenses and for asst. yr. 1999-2000, addition was made on account of difference in the cost of construction of houses. In all the above said returns, the assessee had shown the income under the head "long-term capital gain" on sale of shares and claimed exemption under Section 54F of IT Act. The detail of transactions shown by the assessee in the computation sheet filed along with returns was as under:
Asst yr. No. of shares Date of Cost of Indexed Sale price after LTCG
sold selling acquisition cost reducing (Rs.)
(Rs.) (Rs.) brokerage &
service tax (Rs.)
1996-97 3,700 shares of 17.5.1995 14,985 (as 16,258 2,23,480 2,07,222
Kalyani on
Commercial Ltd. 11.5.1994)
1997-98 4,000 shares of 10.10.1996 40,000 (as 43,415 2,41,600 1,98,185
Chiru Finance on
Inv. & Leasing 21.7.1995)
Co. Ltd.
1998-99 1,000 shares of 17.7.1997 10,500 (as 11,395 1,42,800 1,31,405
Invogue on 2.5.1996)
Furnishers &
Builders Ltd.
1999- 2,800 shares of 17.4.1998 28,000 32,223 1,89,800 1,57,577
2000 Cozy Enterprises
Ludhiana
5. Learned CIT during the scrutiny of record noticed that the assessments were reopened on the basis of DDIT (Inv), Patiala's report who reported that two houses were constructed by Shri Ran Singh Kalsi and his two sons, namely S/Shri Pargat Singh and Kuldeep Singh along with their wives, Smt. Sukhwinder Kaur and Smt. Paramjit Kaur. DDIT (Inv) also recorded the statement of the assessee which formed part of the inquiry report. From the said statement, CIT noticed the following points :
(i) That the assessee purchased shares for the first time during the year 1993-94. The assessee did not have any share on 11th Feb., 2004, i.e., the date oh which the statement of the assessee was recorded. The assessee never suffered loss on sale and purchase of shares (pp. 5 and 8 of the statement).
(ii) That the shares were purchased for business purpose and for utilisation in house construction. Investments were made in the shares in his own name and in the name of Shri Kuldeep Singh and lady members of the family namely, Smt. Sukhwinder Kaur and Smt. Paramjit Kaur by going through the newspapers and magazines like Economic Times, etc. (pp. 5 and 6 of the statement). The assessee also admitted at p. 3 of the statement that he is overall incharge of the group and most of the family decisions on behalf of the above said persons are taken by him.
(iii) That the shares were purchased through Mr. Goenka, a broker whom he met in Delhi in a marriage party for the first time. Mr. Vohra, chartered accountant had introduced him. The assessee admitted that he did not know whether Mr. Vohra was chartered accountant or not (p. 9).
(iv) That the shares were sold by the assessee by going through the rates (that) appeared in the newspapers like The Economic Times, etc. (p. 10).
(v) That the assessee did not know anything about the nature of the companies in respect of which he had purchased shares (p. 11).
According to the learned CIT, the assessee had no interest in sale and purchase of shares. His motive was capital formation through this route only to utilize the money in the construction of the house without giving a single penny towards tax to the Government. Learned CIT observed that it was strange that the person who was trading in sale and purchase of shares of non descript companies by going through the newspapers never suffered a loss. When the assessee was asked that Shri Mahesh Goenka in his statement had admitted that he had been only giving him accommodation entries and whether he wanted to say anything about this or wanted to cross-examine Shri Mahesh Goenka in this regard, the assessee flatly refused to say anything or to cross-examine Shri Mahesh Goenka. So, it was apparent that Shri Pargat Singh, the assessee, purchased and sold shares mainly during the period in which the construction of the two houses was going on in his own name and on behalf of the other family members. Learned CIT further observed that before the AO, the share brokers appeared and retracted from their earlier statements made before the DDIT (Inv) and made a volte face by toeing the version of the assessee that the purchase and sale of shares were genuine. According to him the AO did not make any independent inquiry about the genuineness of the transactions and relied on the affidavits of S/Shri Mahesh Goenka and R.K. Goenka filed by the assessee before him. CIT opined that the AO failed to appreciate the facts as supplied by the DDIT (Inv), Patiala, and completed assessments simply by making an addition of Rs. 14,000 on account of low household expenses for the asst. yr. 1998-99 and Rs. 40,000 on account of difference in cost of construction for the asst. yr. 1999-2000. Thus, the order passed by the AO was prejudicial to the interest of the Revenue within the meaning of provisions of Section 263 of IT Act.
6. Learned CIT issued notices to the assessee for initiation of proceedings under Section 263 of IT Act. In response to that, the assessee submitted that complete details of sales/purchases of shares had been furnished which unquestionably authenticate the genuineness of the long-term capital gams in all those assessment years. It was further stated that the share brokers had made unequivocal admission of the fact that all the purchase/sale transactions carried out by these proprietary concerns on behalf of the assessee were genuine and bona fide and that the AO had recorded the statements of share brokers who confirmed the aforesaid facts. It was submitted that the assessee also filed copies of the bank confirmation regarding remittances and copies of contract note, statements of account, copies of share application, etc., before the AO, who verified the same before completing the assessments under Section 147/143(3). Accordingly it was stated that the issue of notice under Section 263 of IT Act was neither legal nor justified and a request was made for dropping the said proceedings.
7. Learned CIT after considering the submissions of the assessee observed that all the family members who had invested in construction of the house had shown long-term capital gains on sale of shares and such capital gain had been shown as exempt from income-tax by claming exemption under Section 54F of IT Act and that no return had shown loss ever incurred in trading of shares or in investment in shares and that the long-term capital gains had been shown in respect of shares of non descript companies and all the sales/purchases had been made through brokers at Jaipur/Delhi while the assessee and his family members were residing at Mandi Gobindgarh in Punjab, According to the learned CIT, the assessee and his family earned very substantial amount by way of long-term capital gains and sale of shares when they wanted to make the investment in the residential house and the major portion of the investment was coming out of tax-free funds so, it was a colourful device adopted by the assessee by which he managed to generate funds through dubious sale/ purchase of shares without paying a single penny as income-tax and that the substantial gains had been made when there was a total slump in the stock market which was possible only when the transactions were pre-arranged. The learned CIT observed that the AO failed to make any independent inquiry to ascertain the genuineness of the purchases/sales through which the assessee had claimed to have earned money which was shown to have been invested in the construction of house and also failed to make inquiries and ascertaining the facts from Delhi Stock Exchange and Jaipur Stock Exchange which could have unravelled the actual position. She, therefore, held that the order passed by the AO under Section 147/143 was erroneous insofar as it was prejudicial to the interest of the Revenue within the meaning of provisions of Section 263 of IT Act. She, therefore, set aside the assessment order and restored back the matter to the AO's file with the direction that the assessment may be framed afresh after allowing reasonable opportunity of being heard to the assessee. Now the assessee is in appeal.
8. Learned counsel for the assessee reiterated the submissions made before the authorities below. He further stated that the assessee was an income-tax assessee for the past many years and the returns for the years under consideration had been filed within time along with computation of income showing capital gain as earned from the purchase/sale of shares and the utilization of such capital gain for the construction of house. It was further stated that the necessary evidence with regard to investment in purchase/sale of shares had been filed. The returns were processed under Section 143(1) and for the asst. yr. 1997-98, the assessment was completed under Section 143(3) after due application of mind by the AO who made detailed computation of income while passing the order. It was further stated that even the assessments completed under Section 143(1) were complete assessments as per the decision of Hon'ble jurisdictional High Court in the case of Vipan Khanna v. CIT (2002) 255 ITR 220 (P&H) wherein it had been held that if the AO did not issue notice under Section 143(2) within one year of filing the return, the assessment was to be treated equivalent to assessment as made under Section 143(3). Accordingly it was submitted that when all the evidences and the papers with regard to purchases/sales having been filed along with the return of income and the AO having chosen not to take the case for scrutiny by issuing notice under Section 143(2) those assessments were complete assessments for all purposes. It was further stated that the reassessment proceedings were initiated on the basis of report of the DDIT (Inv) which was based on the statements of S/Shri Mahesh Goenka and R.K. Goenka recorded at the back of the assessee. It was contended that the AO completed assessments after making detailed inquiries by issuing various questionnaires to the assessee and after considering the detailed replies/other submissions, particularly the statements of brokers, S/Shri Mahesh Goenka and R.K. Goenka, which were recorded by him and wherein they had retracted from the earlier statements as given to the DDIT (Inv) and confirmed about the share dealing as made with the assessee. It was vehemently argued that during the course of reassessment proceedings, documents in support of purchase/sale of shares in the shape of contract note, statements of account, copies of share application, etc. were furnished and regarding sale of shares documents in the shape of broker's sale invoices, statement of account, form regarding confirmation of actual sales, delivery notes, copies of bank drafts, bank certificates regarding remittance of money, market report of the share prices had been furnished and examined by the AO. The assessee also furnished sworn affidavits of the share brokers, namely S/Shri Mahesh Goenka and R.K. Goenka in which they have made unequivocal admission of the fact that all the purchase/sale transactions carried out by them on behalf of the assessee were genuine and bona fide. The AO had also summoned the share brokers for cross-examination and examined them on oath in the course of reassessment proceedings and on going through the testimonies, the statements made by he share brokers before the DDIT (Inv), Patiala, carry no legal weight. As such confessional statement made by them at the back of the assessee did not carry any legal sanctity and evidentiary value. It was further stated that the assessee filed bank confirmation regarding remittances which depicted that net sale proceeds of the share had been made by M/s M. Goenka & Co. out of their current account with PNB, Lawrence Road, Delhi. The said confirmation provided clinching evidence in support of the fact that the remittances made by the share brokers against sale of shares were genuine and bona fide. Accordingly it was submitted that the AO had framed the assessment after detailed examination of the material as well as inquiries made by him. It was further submitted that notice under Section 263 of IT Act was issued by the predecessor of the CIT who passed the order under Section 263 setting aside the order as passed by the AO. Thus, there was no proper assumption of jurisdiction and so, the proceedings were void ab initio. It was further submitted that the notice under Section 263 of IT Act did not state that the assessment was erroneous and prejudicial to the interest of the Revenue, therefore, the proceedings initiated by the CIT under Section 263 were void ab initio. It was further stated that the AO had taken one of the possible view as such the learned CIT had no jurisdiction to exercise the power under Section 263 of IT Act. It was further stated that the order of the learned CIT had not stated how and in what manner the assessment order passed by the AO after proper verification was erroneous or prejudicial to the interest of the Revenue. Therefore, the order passed under Section 263 of IT Act was not maintainable. It was further stated that the assessee and his family had been dealing in shares from financial year 1993-94 to financial year 2003-04 and such earning from the shares had been disclosed year after year. Therefore, the CIT was not justified in observing that the assessee and his family members earned long-term capital gains only during the period when the houses were constructed. It was emphasized that the learned CIT had never held that dealing in shares was not correct and also not stated what more inquiries were liable to be made by the AO. So, it was not correct ,on the part of the learned CIT to hold that the conditions precedent to issue of notice were satisfied particularly when while setting aside the assessment order he had not given any finding of loss of revenue. In fact, the learned CIT did not come to the firm conclusion while setting aside the well reasoned assessment order passed by the AO and merely setting aside the order in the manner as had been done by the CIT, was not proper. Therefore, the impugned order may be set aside. Reliance was placed on the following case laws :
1. Malabai Industrial Co. Ltd v. CIT (2000) 243 ITR 83 (SC)
2. V.G. Krishnamurthy v. CIT (1985) 152 ITR 683(Kar)
3. H.H. Maharaja Raja Pawer Dewas v. CIT (1982) 138 ITR 518 (MP)
4. K.N. Agarwal v. CIT (1991) 189 ITR 769 (AS)
5. Venkata Krishna Rice Co. v. CIT (1987) 163 ITR 129 (Mad)
6. Jagadhri Electric Supply & Industrial Co. v. CIT (1987) 166 ITR 143 (P&H)
7. CIT v. Gabriel India Ltd. (1993) 203 ITR 108 (Bom)
8. CIT v. T. Narayana Pai (1975) 98 ITR 422 (Kar)
9. CIT v. G.K. Kabra
10. CIT v. Sattandas Mohandas Sidhi
11. R. Kedarnath v. ITO (1991) 38 ITD 574 (Mad)
12. Electro House v. CIT (1968) 70 ITR 421 (Cal)
13. CIT v. Goyal Private Family Specific Trust (1988) 171 ITR 698 (All)
14. Raylon Silk Mills v. CIT (1996) 221 ITR 155 (Guj)
15. CIT v. Sakthi Charities
16. Nand Prakash & Co. v. ITO (1991) 38 ITD 1 (Chd)
17. Decorous Investment Trading Co. Ltd. v. Asstt. CIT (1994) 50 TTJ (Del) 64 : (1994) 77 Taxman 315 (Del)(Mag)
18. Niifabncs Ltd. v. Dy. CIT (1994) 50 ITD 336 (Bom)
19. Patel Cotton Co. Ltd. v. Asstt. CIT (1998) 64 ITD 273 (Mumbai)
20. Plastic Concern v. Asstt. CIT (1998) 61 TTJ(Cal) 87
21. Fisons Ispat Ltd. v. Asstt. CIT (1992) 42 ITD 365 (Del)
22. Order of Tribunal, Chandigarh Bench 'A' dt. 4th Aug., 2003, in the case of V.K. Sood Engg. & Contractors v. Asstt. CIT in ITA No. 1116/Chd/1996 for the asst. yr. 1993-94
23. Order of Tribunal, Chandigarh Bench 'B' dt. 28th Feb., 2005, in the case of Modern Feed Industries v. ITO in ITA No. 375/Chd/2004 for the asst. yr. 2000-01
24. Order of Tribunal, Chandigarh Bench 'SMC' dt. 14th Jan., 2000, in the case of D.P. Singh Chadha & HP. Singh Chadha v. Asstt. CIT in ITA Nos. 374 and 375/Chd/1998 for the asst. yr. 1994-95
25. Order of Tribunal, Chandigarh Bench 'A' dt. 30th March, 2005, in the case of Harmail Singh Bains v. Jt. CIT in ITA No. 345/Chd/2003 for the asst. yr. 1997-98
26. T.K. International Ltd. v. Asstt. CIT (2005) 92 TTJ (Ctk) 188 : (2004) 91 ITD) 481 (Ctk)
27. Order of Tribunal, Chandigarh Bench 'B' dt. 19th Jan., 2005, in the case of ITO v. Radhey Shyam Poddar (HUF) in ITA No. 121/Chd/1999 for the asst. yr. 1995-96
28. Order of Tribunal, Chandigarh Bench dt. 23rd March, 2005 in the case of Dy. CIT v. Charan Singh Prop. Khurana & Co. in ITA No. 387/Chd/2001 for the asst. yr. 1997-98
29. In the case of Hycron India v. Asstt. CIT (2004) 82 TTJ (Jd) 450. .
9. In his rival submissions, learned Departmental Representative for the Revenue strongly supported the impugned order passed by the learned CIT. He further submitted that the learned CIT had given reasons for setting aside the assessment order passed by the AO. He emphasized that the learned CIT had noticed that long-term capital gain shown by the assessee on sale and purchase of shares was not correct as the sale and purchase of shares were not found authentic and the finding of the AO was not based on cogent reason and evidence. He further submitted that the assessee adopted colourful device while adjusting the long-term capital gain towards the construction of the house and did not pay even a single penny of tax although earned a handsome money in the form of long-term capital gains. He further pointed out that the share brokers denied before the DDIT(Inv) that they were engaged in the transaction with the assessee which clearly shows that the assessee manipulated and adjusted his income from other sources and claimed exemption under Section 54F of IT Act. It was also stated that the so-called long-term capital gains earned by the assessee were shown only in respect of nondescript companies. Therefore, the learned CIT was justified in setting aside the assessment order and directing the AO to frame assessment de novo since the AO had not applied his mind because proper and relevant inquiries were not made. In this manner, impugned order was heavily supported by the learned Departmental Representative for the Revenue.
10. I have considered the submissions of both the parties carefully and gone through the material available on record. As regards to the facts of the case are concerned, there is no dispute that the assessee had shown the income earned in the form of long-term capital gains. This fact was disclosed in the returns which were processed under Section 143(1), one of the return for asst. yr. 1997-98 was selected for scrutiny and the AO, after issuing questionnaires and making the inquiries, assessed the income under Section 143(3) of IT Act. It is noticed that the assessee had disclosed the particulars related to the purchase/sale of shares which are available at pp. 9 to 11 of paper book in the shape of bill of share brokers dt. 17th April, 1994, and form 'A' for contract note and the receipt for full payment made by the assessee. The evidence for sale of shares are available at pp. 13 and 14 of paper book. It is also noticed from the record that the assessee received sale proceeds by account payee cheque. It is not in dispute that the AO had verified all the documents relating to purchase/sale of shares, market price, banker certificate, etc. which clearly show that the AO made detailed inquiries before completing the assessment under Section 143(3) of IT Act. It is also noticed that on the report of the DDIT (Inv), the assessments were reopened and the AO further made detailed inquiries in respect of long-term capital gains earned by the assessee and after his satisfaction he accepted the returned income for the asst. yrs. 1996-97 and 1997-98. While addition of Rs. 14,000 had been made on account of low household expenses for the asst. yr. 1998-99 and Rs. 40,000 had been added on agreed basis on account of difference in the cost of construction of houses for the asst. yr. 1999-2000. However, income earned in the form of long-term capital gains had been accepted as was disclosed by the assessee and also exemption under Section 54F was allowed, as was claimed. It is also noticed that earlier the share brokers denied for the transactions with the assessee when the matter was inquired by the DDIT (Inv). However, when the assessee filed the affidavits of the share brokers during the course of assessment proceedings, the AO summoned them and recorded their statements and after his satisfaction only, the AO accepted the version of the share brokers that the transactions involving purchase/sale of shares shown by the assessee were genuine transactions. In the instant case, it appears that the learned CIT relied on the report of the DDIT (Inv), however, ignored this vital fact that before the AO, both the share brokers admitted that the transactions were genuine transactions. Assessment order passed by the AO can only be a subject-matter of the revision under Section 263 but the learned CIT in the instant case had given weightage to the report of the DDIT (Inv) than the assessment order, in other words, the learned CIT set aside the assessment order by relying on the report of the DDIT (Inv) but had not appreciated this fact that the AO made inquiries twice, i.e., at the time of framing assessment under Section 143(3) and also refraining under Section 147/143 after issuing notice under Section 148 of IT Act. Therefore, it cannot be said that the assessment order passed by the AO was without making any proper verification. It is also noticed from the record that for the asst. yr. 1997-98, the original assessment under Section 143(3) was made by Asstt. CIT, Circle, Mandi Gobindgarh namely, Shri G.K. Gosain on 2/98 (copy available at p. 24 of assessee's paper book) while reassessment under Section 147/143(3) had been finalized by ITO, Ward-1, Mandi Gobindgarh namely, Shri B.S. Chauhan on 1st March, 2004 which shows that two separate assessments had been made by different persons, but the income assessed is the same, so, it cannot be said that the AO had not made proper inquiries. It is true that the learned CIT had all the powers of revision under Section 263 if the order passed by the AO is erroneous or prejudicial to the interest of the Revenue. However, in the impugned order learned CIT, nowhere stated how and in what manner the assessment order passed by the AO was erroneous or prejudicial to the interest of the Revenue because the learned CIT set aside the assessment orders simply by stating that the timing of accrual of long-term capital gains could not be more appropriate since the substantial amount by way of long-term capital gains had been earned when the investment was required to be made in the residential house. It seems that the learned CIT set aside the order simply on the basis of assumption that the assessee adopted a colourful device to generate funds through dubious sale/purchase of shares without paying a single penny as income-tax. But the fact remains that the purchase of shares made by the assessee was authenticated by the contract note. The shares were in the name of the assessee which were later on transferred at the time of sale and the sale proceeds were received through banking channel. The rate of shares was near to the rate quoted in the Gauhati Stock Exchange and the AO had made proper inquiries, even recorded the statements of share brokers through whom the transactions took place and the share brokers also filed their affidavits and stated that the transactions of sale and purchase of shares were genuine transactions. The learned CIT simply held that the assessment order was erroneous and prejudicial to the interest of the Revenue. However, it had not been stated that how it was prejudicial to the interest of the Revenue particularly when the AO, after considering the documents in detail and after making proper inquiries and verification came to the conclusion that the transactions in which the assessee was involved, were genuine transactions and he accepted the long-term capital gains shown by the assessee and also allowed exemption under Section 54F of IT Act which were allowable as per law for construction of new house. It is well-settled that the order passed by the AO cannot be erroneous or prejudicial to the interest of the Revenue when one of the possible view had been taken by the AO. In this regard Hon'ble apex Court in the case of Malabar Industrial Co. Ltd. v. CIT (supra) has held as under:
"A bare reading of Section 263 of IT Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO 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) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the AO, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirements of the order being erroneous. In the same category fall orders passed without applying the principle of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of Act and this task is entrusted to the Revenue. If due to an erroneous order of the ITO the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to he interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of Revenue, or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law."
In the instant case also, it appears that the learned CIT invoked provisions of Section 263 of IT Act by assuming that the AO had not made proper inquiries while allowing long-term capital gains to the assessee. However, the fact remains that the AO not only made proper inquiries but also verified from share brokers and examined all the documents placed before him and which were available on record, before coming to a conclusion that the transaction was genuine transaction. So, it cannot be said that the order passed by the AO was without applying mind or it was erroneous in any manner so as to make it prejudicial to the interests of Revenue. The learned CIT, although stated that the assessee had not paid a single penny of tax by claiming exemption under Section 54F of IT Act but loss of revenue, as a consequence of order of AO passed after proper verification and examination, cannot be treated as prejudicial to the interests of Revenue because the exemption had been claimed by the assessee which was permissible in law. Moreover, as per ratio laid down by the Hon'ble Supreme Court in the aforesaid referred to case, it cannot be said that while allowing exemption under Section 54F of IT Act for the long-term capital gains, the order of AO was not prejudicial to the interests of Revenue because detraction so claimed was permissible as per law. As such, the AO had taken one of the possible view which the learned CIT did not agree so the order passed by the AO cannot be treated as erroneous and prejudicial to the interests of Revenue. It is relevant to point out that Hon'ble Rajasthan High Court in the case of CIT v. Girdhari Lal (2002) 258 ITR 331 (Raj) held as under:
"That when the AO after going through the material on record and after considering the explanation of the assessee, made some additions and rejected the books of account, it could not be said that he had not applied his mind. It is not always necessary that every assessee in the line of the business should have the same rate of profit. The Tribunal was correct in cancelling the orders under Section 263 of the IT Act for the asst. yrs. 1977-78, 1979-80 to 1981-82."
In the instant case also, the AO after going through the material on record and after considering the explanation of the assessee, accepted long-term capital gains shown by the assessee. Therefore, the assessment order cannot be said to be erroneous or prejudicial to the interests of Revenue.
Similarly Hon'ble jurisdictional High Court in the case of CIT v. Max India Ltd. (2004) 268 ITR 128 (P&H) held that:
"The view expressed by the AO was a possible view and since the AO had taken a possible view, CIT had no jurisdiction to interfere by exercising his powers under Section 263 of IT Act."
In the present case also, the AO after proper verification and examination of material available on record, had taken one of the possible view. Therefore, the learned CIT had no jurisdiction to interfere by exercising her powers under Section 263 of IT Act, merely on the basis of surmises.
In the light of aforesaid discussion, I am of the confirm view that the learned CIT was not justified in exercising her powers under Section 263 of IT Act and setting aside the assessment order which was passed by the AO after proper verification of the facts available on record. Accordingly, the order passed by the CIT is set aside.
11. Now I will deal with ITA Nos. 1107 to 1110/Chd/2004 in the case of Shri Kuldeep Singh.
12. The facts in this case are similar as the facts involved in the case of Shri Pargat Singh (supra). The assessment order had been passed on the same date and also the impugned order is of the same date. The only difference is of filing the return and dates of completion of assessment. Even the rival contentions were also similar. Therefore, my findings given in the ITA Nos. 1111 to 1114/Chd/2004 in the case of Shri Pargat Singh (supra) shall apply mutatis mutandis for this case also.
13. In the result, all the appeals filed by the assessee are allowed.