Megacity Sales Private Limited, Ludhiana V. Pr.CIT-1, Ludhiana

ITA 120/CHANDI/2021

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0879 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 24-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Share purchase agreement; Audit objection; Set aside
• Section: 147; 263; 2; 119; 22

Judgement Text

आयकर य कर , य य “ब ”, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’, CHANDIGARH BEFORE SMT.DIVA SINGH, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA No. 120/Chd/2021 (Assessment Year: 2011-12) Megacity Sales Private Limited, B-XXIV-4653/1, Sunder Nagar, Ludhiana. बनाम Pr. CIT-1, Ludhiana. थायी लेखा सं./PAN NO: AAECM7797F नधा रती क ओर से/Assessee by: Shri S.C. Jain, CA राज व क ओर से/ Revenue by : Shri Sarabjeet Singh, CIT DR स ु नवाई क तार ख/Date of Hearing: 22.06.2022 उदघोषणा क तार ख/Date of Pronouncement: 03.8.2022 आदेश/ORDER Per Vikram Singh Yadav, Accountant Member: This is an appeal filed by the assessee against the order of Learned Principal Commissioner of Income Tax, Ludhiana [i n sho rt th e ‘ Ld. CI T( A )’ ] dated 30.03.2021 challenging the order passed u/s 263 of the Income Tax Act, 1961 (in short ‘the Act’) for assessment year 2011-12 and raising the following grounds of appeal: “1. On the facts and circumstances of the case and in law, the PCIT-I, Ludhiana has erred in initiating proceedings u/s 263 of the Income Tax Act, 1961 by wrongly assuming jurisdiction u/s 263 and hence, the order passed by the Id. PCIT u/s 263 of the Income Tax Act 1961 is bad in law and void-ab-initio. ITA No.120/Chd/2021 A.Y.2011-12 2 2. Without prejudice to ground no. 1 above, on the facts and circumstances of the case and in law, the Id. PCIT has erred in assuming jurisdiction and passing the revisionary order u/s 263 of the Income Tax Act, 1961 in spite of the fact that the Ld. AO has made adequate inquiries and verification of documents, books of accounts were also sought from the assessee during the course of assessment proceedings and AO has taken one permissible view. The order passed by the AO is neither erroneous nor prejudicial to the interest of revenue, hence the order of PCI" should be set aside: 3. The Id. PCIT has revised the order of the A.O. u/s 263 only on the basis of Audit Objection, hence passing the revisionary order u/s 263 on the basis of Audit Objection is illegal and bad in the eyes of law. 4. The Id. PCIT has not considered or has not uttered a single word on order sheet entries of the A.O. correspondence of Audit Objection/ Judgements on Audit Objections given by the assessee during the proceedings, which violates the Principles of natural justice, hence the order passed by PCIT u/s 263 of the Income Tax Act, 1961 should be set aside.” 2. Br ie f ly , t he fac ts o f the case are t hat the case of the asse sse e was re ope ne d b y i ss uan ce of not ice u /s 1 4 8 on th e bas is of in for m ati on r e ce i ve d f ro m D D I T ( i nv e sti gation ) , Kol kat a t hat th e as se s see has re ce i ve d an amoun t of R s. 25 lac s f r om M/s B ho le Nath De ale rs P vt. Ltd . ou t of ce r tai n un e xp la ine d s our ce s a nd he h as r e ason s to be li e ve th at in come a mo un ti n g to R s 2 5 l ac s h as e scap e d as se s sment wi th in t he me an ing of se cti on 1 4 7 of t he Ac t. The noti ce w as du ly s e r ve d up on t he asse s see and i n re s pon se , the a sse sse e fi le d it s re tu r n o f i nc ome de cl ari n g tot al in come of Rs. 26 , 7 2, 3 0 0/-. Th e r e af te r noti ce s we re issu e d and ITA No.120/Chd/2021 A.Y.2011-12 3 asse ssme nt w as c omp le te d u/s 1 4 3 ( 3) r .w . s. 14 7 of the A ct vi de or de r dat e d 22 . 1 1. 2 0 18 . Su bs e que n tly , the as ses sme nt re cor d s we re cal le d for an d e xami n e d by the Ld . P r .CI T an d a s how c ause noti c e date d 04 . 03. 2 0 21 w as i ss ue d to the asse sse e . I n re spon se , the asse ss ee fi le d its s ub miss ion s wh i ch w e re c onsi de re d b u t not foun d ac ce p ta ble to th e Ld . Pr . CI T and th e ass e ss me n t orde r w as se t as id e w i th a di r e c tio n to p ass a f r e s h or d e r kee p i ng i n mi n d th e obs e r vat ion s mad e i n t he i mp ugn e d or de r an d af ter pr ov id i ng ad e qu ate op p or tun i ty to the as se s se e . 3. Ag ain st th e sai d o rd e r an d f in d in gs of the Ld . Pr .CI T, the asse ssee is i n ap p e al be f ore u s. D ur i ng the cour se o f he ar i n g, the Ld . A R tak e n us th ro ugh t he or d e r o f the AO and i t w as sub mi tte d th at as i s appar e nt fr om th e re ad in g of the as se s sme n t or d e r , the matte r r el ati ng to the amoun t re ce i ve d f r om M/s Bh ol e Nath D e ale r s P vt. Ltd . tow ar d s o f sha re s of M/s Bo oh F in anc e P v t. Ltd . w as d ul y e x amin e d b y the AO . I t w as s ub mi tte d th at s pe ci fi c s how c aus e no tice was is su e d and in r e sp on se , the as se s see fi l e d ne ces sary in for mat ion an d d oc ume n tati on an d b ook s of ac cou nt w e re pr od u ce d al on g w i th ban k sta teme n t w h ic h was ve r if ie d and the re tur ne d in come w as a ccor d i ng ly ac ce p te d by th e AO wi th out dr aw i ng any ad ve r se inf e re n ce . I t w as f ur the r sub mi tte d t hat t he Ld. P r .CI T h as i ss ue d t he sh ow cau se ITA No.120/Chd/2021 A.Y.2011-12 4 noti ce b ase d on th e aud i t ob j e ction r e ce i ve d f r om the Au di t Par ty and t he r e i s n o i nd e p e n den t ap p li ca tio n of mind b y the Ld . Pr . CI T an d i n th i s re gard , ou r re fe re nce w as d r aw n to the c ont e nt s of the sh ow c aus e not ice as we l l as the con te n ts of the aud i t o bj e c ti on, a s o bt ain e d u n de r the R TI Act , 2 00 5 w hi ch for m p art of th e asse ssee ’s Pap e r Book . It was s ub mi tte d that su ch ac ti on on th e par t of the Ld . P r. CI T wh e re he has i ni ti ate d t he r e vi si on ar y p r oce e d in gs b ase d on the au di t ob je ction c ann ot b e sus tai ne d i n the e ye s o f law and in s up p or t, r e l i ance wa s pl ace d on t he de c isi on of th e Hon 'b l e P u nj ab & H ar yan a H ig h Cour t in t he cas e of C I T Vs . Soh ana W ool l e n Mi l ls , 2 96 I TR 2 38 and th e de ci si on s of Coor d in ate Be nche s i n the c ase of Jasw i nd e r S in gh Vs. CI T in I TA No.6 9 0 /C hd /2 0 1 0, d ate d 0 9 . 03 . 20 1 2 , Sar taj j Si ng h Vs. PC I T, I TA No. 15 4 /As r /2 0 1 5 , d ate d 2 5 .0 2 . 20 1 6 , Je e w an lal Ltd . V s . A d d l. CI T, 1 0 8 I TR 4 0 7 , d ate d 1 2.1 2. 1 9 75 and Man nn e s ma nn D e mag A. G . V s. D CI T, 5 3 I TD 5 33 (D e l h i) , d ate d 2 0. 03 . 1 99 5 . I t w as acco rd i ng ly su b mit te d th at the o rde r of the ld P CI T b e se t -asi de and that of the Ass e ss i ng of fi ce b e su stai ne d . 4. P e r con tr a, t he Ld . CI T/D R fi r stl y su b mit te d that i t i s not cor r e c t t o sa y th at the Ld . Pr . CI T has no t a p p li e d hi s in d e pe n de nt min d to the i ssu e at han d an d ha s me r e ly re lie d up on the aud i t obj e c ti on. I t w as s ub mi tte d th at it i s ITA No.120/Chd/2021 A.Y.2011-12 5 not in d i sp ute th at th e re wa s an aud i t ob j e c tio n i n the case of th e asse ssee an d it w as b r ou g ht t o t he n oti ce of th e Ld . Pr . CI T an d b as i s suc h au d it obj e c ti on an d pe r us al of the asse ssme nt re cord s and o n e xami nati on th e r e of, the Ld . Pr . CI T h as i ni ti ate d ac ti on u /s 2 6 3 of t he Act. I n t hi s re gar d , ou r re fe re n ce w as d r aw n to p ar a 2 of the imp ug ne d or de r w he re i n i t w as me nti on e d that the asse s smen t r e cor ds we re c alle d f or an d e xami ne d and t he re afte r on e xami n ati on of t he re c or d, i t w as no te d th at the AO h as not made p r oper and i nd e pe n de n t e n qui r ie s an d the re afte r a sh ow cause noti ce w as is sue d b y t he Ld . P r . CI T. I t wa s ac cor d in gl y sub mi tte d that t h e re i s no me r i t i n t he con te n ti on ad van ce d by t he Ld . A R that t he re is n on -ap pl i cati on o f mi nd on the par t of th e Ld . P r .CI T an d th e j ur i sd i cti on u /s 2 6 3 of th e Act h as b e e n in vo ke d me re l y on th e b as is of au di t ob je cti on . On me r i ts, i t w as su b mitt e d th at th e re-as se s sme n t pr oc ee d i ng s we re in i tia te d bas is t he re p or t re cei ved fr om DD I T ( I n ve s ti gation ) Kol k ata. Howe ve r , the re i s no e vi de nce on r e cor d th at th e re i s e ve n any atte mp t mad e b y the A O o f con si de r in g the i n ve s ti gati on re po rt or cal li n g fo r a ny in for mat ion and d ocu me n tati on fr om th e I nve sti gat ion W in g or f or th at matt e r , c ar r yin g out an y fu r the r i nd e pende n t e xami nati on ot he r than re lyi n g on the d ocume nt ati on sub mi tte d b y the asse ssee . I t was su b mitt e d th at the Ld . ITA No.120/Chd/2021 A.Y.2011-12 6 Pr . CI T h as acc or di n gl y r i ght ly h e l d th at th e r e is no e vi de nce on r e c or d w hi ch e s tab li sh th at the A O h ad mad e att emp t to col le ct e v ide n ce /p ape r s fr om K ol ka ta i n re s pe ct of r ou nd tr ip p i ng/l aye ri n g of t ran sac ti ons . I t w as f ur the r sub mi tte d that th e ge n ui nene ss of th e tr ansact ion as s o c lai me d by th e asse sse e i n re spe ct of amou nt re ce i ve d on s ale of shar e s to M/s Bh ol e Nath D e ale r s P vt . Lt d. has n ot b e e n e xamin e d i n the in stan t case as so r e qu ir e d i n t e r ms of p r ov i sions of se c tio n 68 o f t he Ac t. I t w as s ub mi tte d t hat th e mer e f act of pay me n t h avi ng b ee n re ce i ve d by the asse s see th r ough ban k in g ch an ne l w as n ot s uffi ci e n t to e s tab l is h th e ge n ui ne ne ss o f th e sale t r ansa cti on as so c lai me d by the asse sse e . I t was su b mit te d th at th e as se s se e h as n ot fu rn i sh e d any doc ume ntar y e vi de n ce re g ar di n g tr ans fe r of sha re in th e fo rm of sh ar e tr an sf e r F or m and co p y of s har e ce r ti f ic ate s an d me r e l y stati n g that t he s har e ce r ti fi cate s are n ot i n th e p oss e ss ion of th e asse ss ee an d s uc h state me n t be i ng acc e p te d b y t he AO on fac e v alu e , sh ow s that th e AO has acce p te d asse ss ee ’s ve r s ion with ou t an y fu rt he r ve r i fi cation /con f ir mati on fr om th e p u rc has er . I t was acc or d in gl y su b mit te d th at i t i s c le ar c ase of lac k of e nqu i ry on t he part of t he AO and , th e re f ore , w he re the Ld . Pr . CI T h as se t asi d e the o rde r so p as se d b y the A O, i t is cl e ar ly an or d er p as se d w i th out mak in g e nqu i ri e s or ITA No.120/Chd/2021 A.Y.2011-12 7 ve r i fi cat ion s w hich s ho ul d h ave bee n mad e an d Exp l an atio n- 2 to s e c tio n 2 6 3 o f th e A ct h as b ee n r i ght ly i n vok ed b y the Ld. P r. CI T. I t was accor d i ng ly sub mi tte d th at th e re i s no bas is i n th e c ont e nt ion ad vance d by the Ld . A R and accor d i ng ly , the ap p e al o f the a sse sse e de se rve s to be di smi ss e d . 5. We h ave he ar d the r i val conte n ti ons an d p ur use d the mate r i al avai l abl e on re c or d . F ir s tly , th e o rde r so p ass e d b y the l d P CI T h as be e n as sai le d on th e g ro un d th at the matte r has b ee n d ul y e xami ne d b y th e A O and it is th e r ef ore , n ot a case o f l ack of e nqu ir y on p art o f th e AO an d th us , th e ju ri s di ct ion u/s 2 6 3 has b e e n w r on gly in vok e d b y the ld PCI T. I n th is r e gar d , w e fi nd that it i s a mat te r of r e co rd that r e as ons we re re c or de d an d th e c ase of the ass essee w as re ope ne d u /s 1 4 7 b asi s in for mat ion r e c e i ve d fr om DD I T( I n v) , U ni t 2 ( 1 ) K olk at a th at cas h de po si ts have bee n made i n t he b ank ac cou nt of M/ s G up ta Trad i ng Co, M/s Ad ar sh mar ke ti ng & Nar e sh Kumar P ar e e k and su ch cash de po si ts we re r oute d thr ou gh se ve r al la ye r s be fore re ach in g the be ne fi ci ar ie s an d on t he b as is of c ash tr ail p re p are d , i t is ob se r ve d th at as se s se e co mpan y h ad re ce i ve d a sum of Rs 2 5 l ac s fr om M/s B hol e n ath De ale r s P ri va te Li mite d o ut of su ch e xp l ai ne d sou r ce s. I n t hi s r e gar d , the ld PC I T h as re cor de d a c ateg or ic al f in d in g th at t he A O h as ne ithe r ITA No.120/Chd/2021 A.Y.2011-12 8 con si de re d the inv e s tig ati on re po rt at th e ti me of f r ami ng the a sse ssme nt n or cal l e d for an y d ocu me nt s/i nf or mati on fr om th e I n ve s ti gati on W i ng a n d f ur t he r , the r e is no e vi de n ce on re cor d tha t t he A O h ad mad e an at te mp t to col le ct e v ide nce /p ape r s fr om Kol k ata i n r e s p e ct of lay e r in g of tr an sac tio ns . D ur i ng t he c our s e of he ari n g be f ore us , noth i ng has been b r ough t t o our n oti ce to re b ut th e s aid fi nd i ng s of the l d P CI T. I n ou r v ie w, w he re t he ver y fou nd ati on of r e op e n i ng the asse ssme n t i s r e ce i p t of c e r tai n in for mat ion f ro m the I n ve sti gati on W in g, i t i s e x pecte d fr om the A sse ss in g of fi ce r th at su ch in fo rmat io n and r e late d doc ume ntat ion is e xami ne d b y h im vi s- à-vi s th e sou rce pr ov id i ng suc h i nf or mati on an d f u r the r , cr os s-v e ri fy i t w i th the asse s see an d w he re r e quir e d , to c ar r y ou t f ur ther e xami nati on to v e r if y the c lai m of th e asse ssee . I n the in stan t cas e , the r e is not hi ng on r e c or d w h ic h de mons tr ate any s uc h ac tio n e ve r i ni ti ate d b y th e A sse ss ing of fi ce r. Th e r e for e , whe re t he i nf or mati on av ail ab l e on r e cord p r ima faci e de man d a d e e pe r e xami n atio n an d i nv e s tig ati on, me re acce pt ance of cl ai m of th e as se sse e an d t ak in g on re cord wh ate ve r h as bee n s ub mi tte d i n s up p or t of it s cl ai m, th e Ass e ss i ng off i ce r w ou l d be f ail i ng in h is st atut or y d uty to car r y ou t ne ce s sar y e xami nati on and v e r if i cati on and w h ere the same i s p oi nt e d ou t b y t he ld PCI T, the l atte r i s w e l l ITA No.120/Chd/2021 A.Y.2011-12 9 wi th in h i s j ur i sd i cti on b y i nv ok in g pr ov is io ns of se cti on 2 63 of th e A ct. 6. F ur th e r , the c laim of th e asse ssee be fore the A ssess in g off ic e r w as that th e amou nt of R s 2 5 l acs has been r e ce i ve d thr ou gh n or mal ban k in g ch ann e l f r om M/s B h ol e Nat h De ale r s P v t. Ltd . tow ar d s s ale of s hare s of M/s Bo oh Fi nan ce Pv t. Lt d. I n o rde r to e xami ne t he s aid claim of th e asse sse e , t he A ss e ss in g of fi ce r i ss ue d a sh ow c aus e and i n re sp on se , the as se s se e su b mit te d th at i t h ad pu r ch ase d 14 5 0 0 0 e qu it y sh ar e s of R s 10 0 e ac h th ro ugh ban k in g cha nn e l i n the fin anc ial ye ar e n de d 3 1 .0 3 .2 0 0 7 an d ou t of the se sh ar e s, du r in g th e ye ar un de r c ons id e rat ion , th e asse sse e c omp any sol d 2 5 00 0 s har e s at p ar to M/s Bhol e Nath D e ale rs Pvt. Ltd . an d r e c ei ve d a s um of Rs 2 5 lac s thr ou gh n or mal b an ki n g ch an n e l i n i ts b an k ac cou nt main tai ne d w it h Axi s ban k . F ur th e r , th e asse ssee sub mi tte d cop y o f t he b ank s tateme nt s f or ve r if icati on . Th e Ass e ss i ng off i ce r fu rt he r cal le d for cop y of sh ar e c e r ti fi cate s and i n r e s p ons e , th e ass e ssee compa ny sh ow n i ts in ab il i ty to p r od uc e the s ame for the r e ason th at the asse ssee comp any i s not i n po sse ssi on of the sh are ce r t if icate s as the same has b e e n hand e d o ve r t o th e p u r cha se r c om p any . Th e sub mi ss ion s s o fi l e d we re con sid e re d w it hou t an y adve rse in fe re nce b y t he As se s si ng off i cer . I n th is r e gar d, the ld ITA No.120/Chd/2021 A.Y.2011-12 10 PCI T has st ate d t hat t he Ass e ss ing of f ic e r has acc ep te d the ve r si on of th e asse s se e w i tho ut an y ve r i fi cat ion /con f ir mati on f r o m th e p u rc hase r o r th e b r oke r in a ro uti ne man ne r and the me re f act th at the payme n t h as be e n mad e th ro ugh n or mal b an ki ng c han ne l i s not e n oug h to e s tab l is h t he ge n ui ne ne ss of th e tr an sac ti on and th e pr ov is io ns of se c ti on 68 are cl e arl y attr acte d . W e agr ee w it h the f in d in gs of the l d P CI T and a re of t he co ns id e re d vie w that me r e l y i ss ui ng a sh ow -cau se an d acc e p ti ng the ve rs ion of th e as se s se e w it hou t any cor rob or ati ve d oc ume ntat ion to sup p or t th e s ame and c arr y in g ou t in d e pe n de n t ve r i fic ati on is cl e ar l y a c ase w he re the Ass es si ng off i ce r h as fai le d to car r y o ut ne ce ssar y ve r if ic ati on an d e x amin a ti on. Th e fact um and r e al natu r e of th e tr an sact ion b e i ng a tr ans acti on of s ale of sh are s is c le ar ly n ot e sta bli sh e d i n the in stan t c ase . Me r e l y re ce i vi n g th e amoun t i n the bank state me n t d oe sn ’t d e mo ns tr ate the n atur e of th e tr ans acti on , i t m e re ly de mon str ate the mod e of d isch ar ge of pay me n t. Th e r e al nat ur e of th e sh are tr an sac ti on has to b e de mons tr ate d thr oug h d oc ume n tati on i n te r ms o f con tr act note s (w he re e xe cute d on s tock e xch an ge ), b ro ke r n ote s , sha re ce r ti fi ca tes , D e mat stat e m e n ts, share t ran sf er fo rms , the acce p tance of su ch tr ansacti on s b y the r e spe c tive comp ani e s i n th e ir Boar d me e t ings b y p as si ng a p pr opr i ate ITA No.120/Chd/2021 A.Y.2011-12 11 re sol ut ion s, nec e ss ar y f il i ngs w i th th e c omp any law auth or it ie s, e t c, an d al l th e se d ocume n tati on ar e re qu ire d to be e xami n e d at th e ti me o f i n iti al p ur ch ase and s ubse que nt sal e . I n the in sta nt cas e , t he re i s n oth in g on r e c or d w h ic h can e ve n re aso nab l y d e mon str ate that t he t ran sa c ti on i s i n natu r e of sa le of sh ar e s othe r th an the n am e of the pu r ch ase r and the t ran sac tion amou nt r emi tte d and re ce i ve d in th e as se s se e ’s ban k acc oun t. The r e for e , w he re the A sse ssi n g o ffic e r i s acce p ti ng th e ve rs i on of the asse ssee wi th out an y co rr ob or at iv e docume nt atio n an d w i tho ut car r yi ng out f urth e r e nqu ir ie s /ve r i fi cat ion f r om s o c all e d pu r ch ase r of th e sh ar e s, c oup le d wi th t he f act tha t th e b asis of re ope n in g of th e as se s sme n t w as i n for mati o n r e cei ve d fr om the I nve st igatio n W in g and o ur o bs e r vat ion as s tate d i n par a 5 ab ove , i t is cl e ar l y a cas e wh e re the A ss e ssi ng off i ce r has f ai le d to c ar ry out ne ce ss ary ve r i fi cat ion and e xami nati on . 7. Co mi ng to o t he r con te n ti on rai se d b y the l d AR th at th e Ld. P r .C I T h as is su e d the sh ow c aus e n oti ce b ase d on the aud it ob j e c tio n re ce ive d f r om the A ud i t P ar ty an d th e re i s no in d e pe n de nt ap pl i cati on of min d b y th e Ld . P r. CI T and i n sup p or t, re li an ce w as pl ac e d on th e de c is io n of the H on’b le Pu nj ab an d H ar yana H igh Co ur t i n cas e o f CI T v s S ohana Woo ll e n Mi ll s (supra). Re ce n tl y, i n c ase of Shri Rajinder ITA No.120/Chd/2021 A.Y.2011-12 12 Chauhan vs PCIT, Shimla (ITA No. 308/CHD/2020 dated 21.07.2022), th is Be n ch h ad an occas io n to e xami ne si mi lar con te n ti on r ai se d b y the as se s se e i n that case an d our fi nd i ng s the re i n r e ad as u nde r : 8. Before parting, we deem it appropriate to also address the submissions of the ld. CIT-DR who has carefully in his inimitable style has argued that merely because the exercise was triggered on account of the Audit Objection, this fact by itself may not be a reason to quash the proceedings. For the said purpose, our attention has been invited to Instruction N o . 7 / 2 0 1 7 p ar a 5. 3 which has been reproduced in the earlier part of this order. On a consideration thereof and the proposition of law as cited before us, we find that objections of the ld. CIT-DR are valid. On a careful reading of the decision of the jurisdictional High Court in the case of C I T V s S o h a n a W o o l l e n M i l l s 2 9 6 I T R 2 3 8 ( P& H ) we find that the proposition of law as laid down by the jurisdictional High Court is that; “Mere Audit Objection and merely because a different view could be taken were not enough to say that the order of the AO was erroneous or prejudicial to the interests of the Revenue.” A plain reading of the said decision makes it clear that the two reasons being considered by the Hon'ble High Court i.e. Audit Objection and the possibility of the Revisionary Authority having a view different from the view taken by the AO were by itself not sufficient to warrant the exercise of Revisionary Powers u/s 263. T h e d ec i s i o n ITA No.120/Chd/2021 A.Y.2011-12 13 p r o c e e d s o n t h e w e l l a c c ep t e d l e g a l p o s i t i o n o f l a w, n a m e l y t h e o r d e r s o u g h t t o b e s e t a s i d e b y t h e l d . P C I T m u s t n e ce s s a r i l y m e e t t h e t w i n r eq u i r em e n t s o f p o i nt i n g o u t t h e e r r o r i n t h e o r d e r p a s s e d a n d s u ch a n e r r o r w h i c h i s a l s o p r e j u d i c i a l t o t h e i n t e r e s t s o f t h e R e v e n u e. B y m e r e l y c i t i n g a n A ud i t O b j e c t i o n a n d s e t t i n g o u t f ac t s t h a t a d i f f e r e n t v i e w i s a l s o p o s si b l e o n t h e s a m e s e t o f f a c t s h a s b e e n h e l d t o b e n o t a v a l i d e x er c i s e o f th e R e v i s i o n a r y p o w e r s u / s 2 63 o f t h e A c t . T h u s , w e f in d t h a t t h e H o n ' b l e H i g h C o u r t i n t h e a f o r e s a id d e c i s io n d i d n o t l a y d o w n t h e p r o p o s i t i o n t h a t i n a n y c a s e w h e r e t h e r e i s a n A u d i t O b j e c t i o n , t h e l d . P C I T i s b a r r e d t o c on s i d e r e x e r c i s i n g p o w e r s u / s 2 6 3 . For the sake of completeness, we reproduce para 7 from the aforesaid decision : "7. A reference to the provisions of s. 263 of the Act shows that jurisdiction thereunder can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation." 8.1 Thus, w e a r e o f t h e v i e w t h a t t h e a r g u m e n t c a n v a s s e d o n b e h a l f o f t h e a s s e s s e e t h a t m e r e l y b e c a u s e t h e r e i s a n A u d i t O b j e c t i o n , t h e e x e r c i s e of p o w e r s u / s 2 6 3 i s i n v a l i d , w e h o l d c a n n o t b e a c c e p te d . What we understand from the aforesaid decision and various other decisions cited on this proposition is that a ITA No.120/Chd/2021 A.Y.2011-12 14 mechanical exercise of revisionary powers u/s 263 by the Revisionary Authority by merely citing the Audit Objection cannot be said to be a valid exercise of Revisionary Powers. The ld. PCIT is require to give an independent finding considering the record. The error in the order of the AO, that too such an error which is prejudicial to the interests of the Revenue, has to be pointed out by the Revisionary Authority in the order. The onerous power cannot be exercised mechanically and arbitrarily. The sagacious arguments of the ld. CIT-DR to this extent, we find are well founded.” ( E m p h a s i s s u p p l i e d ) 8. S imi l ar vi e w h as b ee n t ake n by th e Coor d i nate D el hi Be n che s in c ase of Mannesmann Demag A.G vs DCIT (Supra) w he r e i n it w as h e l d as und e r : “13. We have given our careful consideration to the rival contentions and have perused the records. The contention raised on behalf of the assessee that the action of the Commissioner of Income-tax under Section 263 based on the audit objection is invalid and contrary to law is not well- founded. Whereas we agree with the learned counsel for the assessee that the powers under Section 263 are vested in the Commissioner of Income-tax and it is he who has to apply his mind before coming to the conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue, yet, that does not mean that the Commissioner of Income-tax has not to be assisted by anyone else in collecting information and in bringing to his notice any errors or omissions requiring action under Section 263 or under any other provision of the Act. It will be unreasonable to perceive that the ITA No.120/Chd/2021 A.Y.2011-12 15 Commissioner of Income-tax would himself examine the assessment records of all the assessees within his jurisdiction so as to arrive at a conclusion whether any action under Section 263 is required or not. It is humanly impossible. Therefore, setting up of a machinery known as internal audit which assists the Commissioner of Income- tax in this regard is not improper as the said machinery only brings to the notice of the Commissioner of Income-tax the acts of omission, errors and matters of prejudice caused to the revenue. It has to be borne in mind that opinion or the information of the internal audit is not binding upon the CIT. It is a mode for excluding such cases not requiring the attention of the Commissioner for the purposes of consideration of any action under Section 263. Once the matter has been brought to the notice of the CIT, it is the Commissioner who has to exercise his powers under Section 263 and for that purpose it is necessary for him to apply his mind to the facts of the case taking into account the objection raised by the internal audit. Such a consideration would not be contrary to the spirit of the scheme of the Act and the powers of the CIT under Section 263. The learned D.R. has cited the decision of the Supreme Court in the case of Kasturbhai Lalbhai (supra) which as rightly pointed by Shri Ganeshan has been overruled by the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. In any case that decision is inapplicable to the facts of this case. We are not called upon to decide as to whether the audit objection shall constitute information for the purposes of re-opening of an assessment under Section 147 as was the issue before the Supreme Court in the aforementioned case. The issue before us is limited as to whether the Commissioner of Income-tax would be justified in taking action under Section 263 when the matter is brought to his notice by the internal audit. In our view, the internal audit being a machinery under the administrative control of the CIT for the purposes of pointing out the acts of omissions, errors and prejudices caused to the revenue, they are doing ITA No.120/Chd/2021 A.Y.2011-12 16 so for and on behalf of the Commissioner of Income-tax. Such a report as already observed can form the basis for taking action under Section 263 provided the Commissioner of Income-tax applies his mind before deciding as to whether any action under Section 263 is warranted or not. He has not to merely act upon the audit objection in a mechanical manner but has to form his own opinion which would include information and opinion of the auditors. Considering the facts and circumstances of this case and the view expressed above, we do not find any fault with the Commissioner of Income-tax in having initiated action after the receipt of the objection from the internal audit, in so far as, we are satisfied that CIT has applied his mind before taking action under Section 263. This objection raised on behalf of the assessee in this regard is, therefore, rejected. 9. Th e r e f or e , i n the i ns tant case , me re l y be cau se the re is an A ud i t O b je cti on , c on te n ti on re gar d in g t he exe rc ise of pow e r s u /s 2 6 3 as in val i d can not b e ac ce p te d. W h at i s re le van t to e xami ne is w he ther th e re i s a me ch an ic al e xe r c ise of re v ision ar y p ow e r s u/s 2 63 b y t he l d P CI T b y me r e l y c it in g t he Au d it O bj e c ti on or th e re i s d u e ap p l ic ati on of mi nd b y h i m be fore e xe r ci se o f s uch p owe rs. I n the in stan t c ase , w e re fe r to p ara 2 of th e i mp u gn e d orde r wh e re in it w as me n ti one d that the asse ss me n t re cor ds w e re cal le d for b y the ld P CI T and e xami ne d an d th er e af te r on e xami nati on o f the re c or d s, i t w as n ote d th at t he AO has n ot made p r op e r and in de pt h e n qui rie s and the re af ter a s how caus e n oti ce was is su e d b y th e L d . P r . CI T an d t h e conte n ts the re of re ad as un d e r : ITA No.120/Chd/2021 A.Y.2011-12 17 “2. Assessment records were called for and examined. On examination of the record, it is seen that the assessment was completed under section 143(3)r.w.s. 147 of I.T. Act 1961 on 22.11.2018 for the assessment year 2011-12 which is found to have deformities and made without making proper and in depth enquiries. On examination, following issues have been noticed and highlighted in show cause Notice dated 04.03.2021 issued under DIN and notice No.ITBA/REV/F/REV1/2020- 21/1031231924 (1) through online: “4. From the examination of the assessment record for the A.Y. 2011-12, it is noticed that you have failed to submit affidavit from purchaser i.e. M/s BholeNath Dealers Pvt. Ltd. or any documentary evidence regarding proof of transfer of shares/share certificates which was called by the AO at the time of assessment proceedings. But you simply stated that the share certificate was not in possession of the assessee company. Moreover, no bank account statement was submitted by you to justify your contention that all the purchases of share transactions were routed through bank accounts. However in the absence of Share Certificate, any confirmation from purchaser/contract note or Share, Broker's ITA No.120/Chd/2021 A.Y.2011-12 18 Certificate, the transaction of sale of shares was not substantiated. The mere fact of payment by banking channel, by itself, is not enough to establish the genuineness of transactions. Genuineness of transactions in terms of section 68 of the Act has not been proved by you. 5. There is no evidence on record which can establish that the A.O. had made attempt to collect evidence/papers from Kolkata in respect of round tripping/layering of transactions. The A.O. has allowed the claim of the assessee without any proper verification. The A.O. has neither considered investigation report at the time of framing of assessment nor called any documents/information from Investigation Wing, Ludhiana. Hence, an amount of Rs. 25,00,000/- received on account of sale of shares of M/s Booh Finance Pvt. Ltd. to M/s Bholenath Dealers Pvt. Ltd. was remained unexplained." 10 . W e t he re fore d o n ot ag re e w i th th e c onte nt ion of th e Ld. AR t hat th e r e i s n on -ap pl i cati on of mi nd on t h e p art of the Ld . P r .CI T a n d t he j ur i sd i ction u /s 26 3 of t h e Act h as be e n i nv oke d mer e ly on the b as is of au di t obje cti on. R athe r, we f in d th at t he ld PCI T h as t ak e n in to c on si de re d the e nt ire ty o f mat e ri al on r e cor d i ncl ud i ng aud i t o bj ec ti on as we ll as i n ve s ti gati on r e p or t and the re af te r , h as c on si de re d it app r op r ia te to ex e r ci se h i s r e vi s ion ar y j ur i sd ic ti on u /s 2 63 as the p e ru sal of su ch re cor d s p r ima fac i e de mons trate d that th e o rd e r so p ass e d b y the AO w as e r r one ous as w e l l as ITA No.120/Chd/2021 A.Y.2011-12 19 pr e ju di ci al t o th e i nte re st of t he Re ve n ue . W e the ref or e d on ’t agr ee w i th t he c ont e n tio n so ad vanc e d by the ld AR i n t hi s re gar d . 11 . I n li gh t of af or e sai d d i sc uss io ns an d i n th e ent ir e t y of fact s and ci r cumstan ce s of the c ase , we do n ot f in d an y in fi r mit y i n the e xe r ci se of ju r is d ic ti on u /s 26 3 by t he ld PCI T and th e ord e r so p as se d i s u ph e l d and the gr ound s of app e a l take n b y th e asse ssee are dis mis se d . I n the re s ul t, the ap p e al of t he asse s se e i s d is misse d. O r d e r p r on o u n ce d o n 0 3 . 0 8 . 2 0 2 2 . Sd/- Sd/- (DIVA SINGH) (VIKRAM SINGH YADAV) /Judicial Member लेख /Accountant Member Dated: 03.8.2022 *रती* आदेश क % त&ल'प अ*े'षत/ Copy of the order forwarded to : 1. अपीलाथ+/ The Appellant 2. %,यथ+/ The Respondent 3. आयकर आय ु -त/ CIT 4. आयकर आय ु -त (अपील)/ The CIT(A) 5. 'वभागीय % त न0ध, आयकर अपील य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File # $ स / By order, सह (ंज / Assistant Registrar