Shri Arun Kumar Aggarwal, New Delhi V. CIT, New Delhi

ITA 2635/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6574 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 31-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Cost of acquisition; Fair market value; Valuation report; Assessment record
• Section: 143(3); 263

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI KULDIP SIINGH , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I TA NO . 2635/DEL/2012 (ASSESSMENT YEAR: 2007 - 08 ) ARUN KUMAR AGGARWAL, B - 1/74, SAFDARJUNG ENCLAVE, NEW DELHI PAM:AAEPA1259K VS. CIT, CENTRAL - II, ROOM NO. 341, ARA CENTRE, E - 2, JHANDEWALAN EXTN, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. NK BANSAL, CA REVENUE BY: SH. RAVI JAIN, CIT DR DATE OF HEARING 09/01/ 2017 DATE OF PRONOUNCEMENT 20 /0 2 /2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS APPEAL IS PREFERRED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX, CENTRAL II, NEW DELHI AGAINST THE ORDER OF REVISION UNDER SECTION 263 OF THE INCOME TAX ACT 1961 IN RESPECT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT 1961 DATED 30TH OF DECEMBER 2009 FOR ASSESSMENT YEAR 2007 08. 2. ASSESSEE HAS RAISED AND ALL 6 GROUNDS OF APPEAL HOWEVER THEY ARE AGAINST THE SINGLE ISSUE OF THIS RESTRICTION ASSUMED BY TH E LD. CIT UNDER SECTION 263 OF THE INCOME TAX ACT. THE GROUNDS OF APPEAL ARE AS UNDER: - 1. THAT THE LD. COMMISSIONER OF INCOME TAX, CENTRAL - II ERRED IN LAW AS WELL AS IN FACTS IN INITIATING THE PROCEEDINGS U/S 263, BY ISSUE OF SHOW CAUSE NOTICE DATED 02ND MARCH 2012, ON THE ALLEGED GROUND THAT THE ORDER U/S 143(3) DATED 30TH DECEMBER, 2009 WAS I N SO FAR AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, AND HIS SUCH CONCLUSIONS ARE BASED ON HIS SURMISES AND GUESSES AND ARE CONTRARY TO THE FACTS AND MATERIAL ON RECORD. 2. THAT THE ORDER U/S 263 DATED 26TH MARCH 2012 PASSED BY THE LD. COMMISSIONER OF INCOME TAX IS WITHOUT JURISDICTION, NOT GOOD IN LAW AND VOID, AS THE ORDER U/S 143(3) DATED 30TH DECEMBER 2009 WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3. THAT THE LD. COMMISSIONER OF INCOME TAX, CENTRAL - II E RRED IN LAW AS WELL AS IN FACTS IN SETTING ASIDE THE ORDER U/S 143(3) DATED 30TH DECEMBER 2009 AND DIRECTING THE ASSESSING OFFICER TO MODIFY THE ASSESSMENT ORDER IN LIGHT OF THE DIRECTIONS STATED IN HIS ORDER U/S 263, AND HIS SUCH DIRECTION IS BAD IN LAW A ND VOID AND CONTRARY TO THE PROVISIONS OF LAW, AS THE ASSESSMENT ORDER U/S. 143(3) WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD. COMMISSIONER OF INCOME TAX ERRED IN LAW AS WELL AS IN FA CTS IN HOLDING THAT THE ASSESSING OFFICER ACCEPTED THE SALE CONSIDERATION AS DECLARED BY THE ASSESSEE ON THE SALE OF PROPERTY AT VILLAGE SHORKHA (DADRI), WITHOUT APPRECIATING THE RELEVANT STATUTORY PROVISION OF THE INCOME TAX ACT, ARE BASED ON HIS SURMISES AND GUESSES AND ARE CONTRARY TO THE PROVISIONS OF LAW. 5. THE LD. COMMISSIONER OF INCOME TAX ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE A.O. IN HIS ASSESSMENT ORDER HAS ALLOWED THE CLAIM OF BROUGHT FORWARD LONG TERM CAPITAL LOSS OF RS.36,75,1 00/ - , WITHOUT ANY VERIFICATION, EXAMINATION AND APPLICATION OF MIND, ARE BASED ON HIS SURMISES AND GUESSES AND ARE CONTRARY TO THE PROVISIONS OF LAW. 6. THE LD. COMMISSIONER OF INCOME TAX ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE A.O. IN HIS ASSESSMENT ORDER HAS ALLOWED THE CLAIM OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF RS.5,00,000/ - , WITHOUT ANY VERIFICATION, EXAMINATION AND APPLICATION OF MIND, ARE BASED ON HIS SURMISES AND GUESSES AND ARE CONTRARY TO THE PROVISIONS OF LAW. BRIEFLY STATED ASSESSEE IS AN INDIVIDUAL WHO FILED ITS RETURN OF INCOME ON 04/01/2008 DECLARING INCOME OF RS. 2 981168/ . ASSESSMENT UNDER SECTION 143 (3) WAS PASSED ON 30/12/2009 ASSESSING TOTAL INCOME AT RS. 3 004367/ . 3. ON EXAMINATION OF THE ASSESSMENT RECORD THE LD. CIT OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASON THAT ASSESSEE HAS SHOWN LONG - TERM CAPITAL GAIN ON SALE OF CERTAIN PROPERTIES AND ADJUSTED T HE LONG TERM CAPITAL LOSS CLAIMED TO HAVE BEEN INCURRED BY ASSESSEE IN P RECEDING PREVIOUS YEAR. FURTHER MORE WITH RESPECT TO THE CAPITAL GAIN ON SALE OF PROPERTY AT VILLAGE SHORKHA ( DADRI ) THE ASSESSEE SHOWN SALE CONSIDERATION OF RS. 10 LACS WHEREAS THE VA LUE OF THE PROPERTY TAKEN FOR THE STABILITY PURPOSE WAS RS. 58.75 LACS AND THEREFORE THE PROVISIONS OF SECTION 50 C OF THE INCOME TAX ACT WERE NOT LOOK INTO BY THE LD. ASSESSING OFFICER WHILE FRAMING ORIGINAL ASSESSMENT ORDER. BEFORE THE LD. CIT ASSESSEE P LEADED THAT LAND IN QUESTION WAS LOCATED IN FLOOD PRONE AREA AND THERE WAS NO MARKET VALUE OF THAT PROPERTY OF THAT PARTICULAR LAND AT THAT PARTICULAR TIME AS THE RATE AT WHICH THE LAND IS SOLD WAS THE FAIR MARKET VALUE AT THE TIME OF SALE AND THE VALUATIO N AS PER THE STEM VALUATION AUTHORITY CANNOT BE TAKEN AS THE FAIR MARKET VALUE FOR WORKING OF THE CAPITAL GAIN OF THAT PROPERTY. LD. CIT REJECTED THE CONTENTION OF THE ASSESSEE AND HAS HELD THAT NEITHER THE ASSESSING OFFICER HAS RAISED THIS ISSUE NO THE AS SESSEE HAS MADE ANY SUBMISSION ON THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEREFORE THE PROVISIONS OF THE SECTION 50 C HAVE BEEN OVERLOOKED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HE HELD THAT ORDER OF THE LD. ASSESSING OFFICER IN NO T ADOPTING THE FAIR MARKET VALUE ACCORDING TO THE STAMP DUTY AUTHORITIES AS IT EXCEEDS THE SALE CONSIDERATION IS AN ERROR IN THE ASSESSMENT ORDER AND IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITH RESPECT TO THE SET OFF OF BROUGHT FORWARD LONG - TERM CAPITAL LOSSES IT WAS FOUND BY THE LD. CIT THAT ASSESSEE IN THE RETURN OF INCOME HAS CLAIMED SET - OFF OF LONG TERM CAPITAL LOSS OF RS. 3675100/ - IN ASSESSMENT YEAR 2006.07 HOWEVER SAME WAS NOT DECLARED IN THE RETURN FILED BY THE ASSESSEE IN FORM NUMBER 2D. FURTHER THE DOCUMENTS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2007 - 08 SHOWS THAT THE ALLEGED LOSSES ON ACCOUNT OF SALE OF AGRICULTURAL LAND AT HARYANA WHICH IS NOT CHARGEABLE TO TAX AS PER THE PROVISIONS OF SE CTION 2 (14 ) OF THE INCOME TAX ACT. THEREFORE, IT WAS OBSERVED BY THE LD. CIT THAT THE LD. ASSESSING OFFICER DID NOT CONSIDER THIS BEFORE ALLOWING THE ASSESSEE'S CONTENTION FOR THE SET - OFF OF THE ABOVE LOSS. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESS EE SUBMITTED THAT THERE IS NO QUARREL PROVIDED UNDER FORM NUMBER 2D WELL - PLACED CARRIED FORWARD LOSS CAN BE SHOWN AND FURTHER SAME WAS DISCLOSED IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006 2007 THROUGH THE COMPUTATION OF INCOME ANNEXURE OF CAPITAL GAI N OR LOSS WHICH WERE PART OF THE RETURN OF INCOME. HE FURTHER SUBMITTED THAT ACCORDING TO THE MAP OF MUNICIPAL AREA FROM THE OFFICIAL WEBSITE OF MUNICIPAL CORPORATION, G URGAON , THE LAND IS SITUATED WITHIN THE 8 KM FROM LIMITS OF THAT PRINCIPLE CORPORATIONS THEREFORE IT IS NOT AN AGRICULTURAL LAND. THE LD. CIT REJECTED THE CONTENTION OF THE ASSESSEE AS THE MAP WAS DOWNLOADED ON 10 AND 2011 WHEREAS THE ASSESSEE IN FY 2000 506 SOLD THE LAND WHE N GURGAON WAS PRINCIPAL COUNCIL. THEREFORE LD. CIT HELD THAT THIS I SSUE WAS NOT EXAMINED BY THE LD. ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEN THE ASSESSEE HAS ALSO FAILED TO SUBSTANTIATE THE SAME DURING THE COURSE OF PRESENT PROCEEDINGS THEREFORE THE ORDER PASSED BY THE LD. ASSESSING OFFICER ALLOW ING THE CLAIM OF BROUGHT FORWARD CAPITAL LOSS TO THE ASSESSEE WITHOUT ANY VERIFICATION, EXAMINATION AND APPLICATION OF MIND IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITH RESPECT TO THE SALE OF SHARES OF SATNAM HAEGENS LIMITED FOR RS. 5 LACS THE LD. CIT NOTED THAT ASSESSEE HAS CLAIMED CAPITAL GAIN ARISING ON SALE OF THOSE SHARES IS EXEMPT UNDER THE PROVISIONS OF SECTION 10 (38) OF THE INCOME TAX ACT HOWEVER IN CASE OF THE ASSESSEE THE SECURITY TRANSACTION TAX HAS NOT BEEN PAID ON THE IMPO RT TRANSACTION WHICH IS APPARENT FROM THE FACT THAT THE ENTIRE DIFFERENCE OF AMOUNT BETWEEN THE SALE CONSIDERATION AND COST OF ACQUISITION HAS BEEN SHOWN AS PROFIT. THEREFORE THE CLAIM OF THE ASSESSEE OF THE EXEMPTION ON CAPITAL GAIN ARISING ON SALE OF THO SE SHARES WAS ALSO ACCEPTED BY THE LD. ASSESSING OFFICER WITHOUT VERIFYING WHETHER IT COMPLIES WITH THE PROVISIONS OF SECTION 10 (38) OF THE INCOME TAX ACT AND THEREFORE THE ORDER PASSED BY THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE ASSESSEE IS THE ISSUES WERE NOT INVESTIGATED, VERIFIED AND EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BASED ON THIS FINDING THE LD. CIT PASSED ORDER UNDER SECTION 263 OF THE INCOME TAX ACT ON 26/03/2012. THE ASSESSEE CHALLENGES THIS ORDER BEFORE US IN THIS APPEAL. 4. THE LD. A R SUBMITTED BEFORE US THAT ORDER PASSED BY THE LD. ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE IS IT WAS PASSED WITH DUE APPLICATION OF MIND AND AFT ER PROPER INQUIRY. HE SUBMITTED THAT CAPITAL GAIN ON SALE OF PROPERTY AT VILLAGE SHORKHA WAS SOLD FOR RS. 20 LAKHS AND BEING 50% SHARE OF THE ASSESSEE THE SALE CONSIDERATION WAS TAKEN AT RS. 10 LACS BY FILING RETURN OF INCOME. HE ADMITTED THAT THE SALE DEE D THE VALUE OF THE PROPERTY TAKEN FOR THE STEM DUTY PURPOSE WAS RS. 58.75 LAKHS HOWEVER THE STAMP DUTY RATES CANNOT BE APPLIED TO THE FACTS OF THE CASES OF THE SALE OF THE LAND BECAUSE THE PROPERTY WAS SITUATED IN FLOOD PRONE AREA AND FOR THIS HE REFERRED TO PAGE NO. 71 TO 73 OF THE PAPER BOOK WHICH IS A VALUATION REPORT SUBMITTED BY THE APPROVED VALUER VALUED THE PROPERTY IS 19.97 LAKHS STATING THAT THE SAID LAND IS SITUATED IN WATER LOGGING AREA LOW - LYING AREA SO THAT THE LAND RATE IS LOWER THAN THE OTHER LAND. HE FURTHER REFERRED TO THE PAGE NO. 38 OF THE PAPER BOOK WHICH IS A INQUIRY LETTER DATED 13/07/2009 ISSUED BY THE LD. ASSESSING OFFICER BEFORE FRAMING THE ASSESSMENT UNDER SECTION 143 (3) WHICH IS SUBJECT TO CHALLENGE UNDER SECTION 263 OF THE INCOM E TAX ACT. HE REFERRED TO PARA NO. 2 OF THAT LETTER WHEREIN THE SALE DEED IN RESPECT OF IMMOVABLE PROPERTY SOLD WAS ASKED FOR. THE LD. AUTHORIZED REPRESENTATIVE ALSO STATED THAT THE STEM VALUATION DATE IS NOT APPL ICABLE TO THE LAND SOLD FOR THE REASONS S TA TED BY HIM BEFORE THE LD. CIT WITH RESPECT TO THE SET OFF OF BROUGHT FORWARD LONG - TERM CAPITAL LOSS IT WAS SUBMITTED BY HIM THAT THIS ISSUE WAS ALSO EXAMINED BY THE ASSESSING OFFICER WIDE SERIAL NO. 3 OF THE QUERY LETTER DATED 13/07/2009 WHICH IS PLACED AT PAGE NO. 38 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT SAME WAS INCLUDED IN THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006 07. HE FURTHER SUBMITTED THAT THE SAID LAND IS NOT AN AGRICULTURAL LAND AS IT IS SITUATED WITHIN THE 8 KM OF THE RADIUS OF THE PRINCIPAL CORPORATION AND FURTHER THE TEHSILDAR SUBMITS HIM THAT CERTIFICATE DATED 07/04/2015 ALSO PROVES THIS FACT . THEREFORE THE LAND SOLD IN THE PREVIOUS YEAR WAS NOT AN AGRICULTURAL LAND AND WAS CHARGEABLE TO TAX AND THER EFORE THE LOSS INCURRED BY THE ASSESSEE IN ASSESSMENT YEAR 2006 07 WAS RIGHTLY ALLOWED SET - OFF IN ASSESSMENT YEAR 2007 08. THEREFORE, HE SUBMITTED THAT THERE IS NO ERROR IN THE ORDER OF THE LD. ASSESSING OFFICER. WITH RESPECT TO THE SALE OF SHARES WILL BE EXEMPTION WAS CLAIMED UNDER SECTION 10 (38) OF THE INCOME TAX ACT HE SUBMITTED THAT THE LD. ASSESSING OFFICER HAS ASKED FOR THIS DETAIL WIDE PARA NO. 4 AND 5 OF THE QUERY LETTER. THEREFORE HE SUBMISSION WAS THAT THAT THE ORDER HAS BEEN PASSED AFTER DUE ENQUIRY AND HENCE CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT AND SUBMITTED THAT ORDER PASSED BY THE ASSESSING OFFICER WAS WITHOUT ANY ENQ UIRY. HE SUBMITTED THAT QUERY LETTER ISSUED BY THE LD. ASSESSING OFFICER WAS JUST OBTAINING DOCUMENTS AND THE LD. ASSESSING OFFICER HAS NOT EXAMINED ALL CARRIED OUT ANY INQUIRY ON THOSE DOCUMENTS AND THEREFORE THE ORDER PASSED BY THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE THEREFORE SUBMITTED THAT ORDER PASSED BY THE LD. CIT IS IN ACCORDANCE WITH LAW. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PRODUCED THE ORDER OF THE LD. ASSESSING OFFICER, WHICH HAVE BEEN MADE SUBJECT TO THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT BY THE LD. CIT. A) ON THE ISSUE OF THE CLAIM OF THE ASSESSEE THAT PROVISIONS OF SECTION 50 C OF THE INCOME TAX ACT DO NOT APPLY TO THE SALE OF THE LAND MADE BY THE ASSESSEE DURING THE YEAR FOR RS. 20 LAKHS AND FOR WHICH THE SHARE OF THE ASSESSEE WAS ONLY RS. 10 LACS AS IT WAS STATED TO BE SITUATED IN WATERLOGGING AREA. HE THEREFORE SUBMITTED THAT THE FAIR MARKET VALUE ADOPTED BY THE STEM DUTY PURPOSES OF RS. 58.75 LAKHS CANNOT BE A DOPTED. ON PERUSAL OF THE QUERY LETTER ISSUED BY THE LD. ASSESSING OFFICER IT WAS NOTED THAT HE HAS ASKED INFORMATION ABOUT THE COPY OF SALE DEED IN RESPECT OF IMMOVABLE PROPERTY SOLD AS WELL AS COST OF ACQUISITION OF THOSE PROPERTY. THE LD. ASSESSING OFFI CER HAS APPARENTLY NOT APPLIED HIS MIND TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 50 C OF THE INCOME TAX ACT TO THE SALE CONSIDERATION SHOWN BY THE ASSESSEE WHEN THE SALE DEED WAS ALSO AVAILABLE BEFORE HIM WHERE THE FAIR MARKET VALUE OF THE PROPER TY WAS SHOWN AS 58.75 LAKHS. IN VIEW OF THIS WE ARE OF THE OPINION THAT LD. ASSESSING OFFICER HAS NOT CONDUCTED ANY INQUIRY ON THIS ASPECT OF THE COMPUTATION OF CAPITAL GAIN AND THEREFORE THE ORDER OF THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THIS COUNT. B) WITH RESPECT TO THE CLAIM OF THE LONG - TERM CAPITAL LOSS SHOWN BY THE ASSESSEE ON PER USUAL OF QUERY LETTER DATED 13/07/2009 ISSUED BY THE LD. ASSESSING OFFICER HE HAS ASKED THE DETAILS OF LOSS OF RS. 36.75 LAK HS CLAIMED BY THE ASSESSEE WHILE COMPUTING THE LONG TERM CAPITAL GAINS. FURTHER THERE IS NO EVIDENCE ON RECORD THAT THE LD. ASSESSING OFFICER BEFORE ALLOWING THE SET - OFF HAS CONSIDERED WHETHER THE LOSS SHOWN BY THE ASSESSEE IN ASSESSMENT YEAR 2006 2007 IS ALLOWABLE AS SET - OFF DURING THE YEAR OR NOT. THE LD. CIT HAS FURTHER STATED THAT ONLY ON 02/06/2008 THE PRINCIPAL CORPORATION OF GOOGLE WAS CONSTITUTED AND FURTHER THE CERTIFICATE OBTAINED BY THE ASSESSEE DATED 7 07/04/2015 ALSO SHOWS THAT DURING THE COURS E OF ORIGINAL ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2007 08 THE ISSUE WAS NOT AT ALL EXAMINED WHETHER THE IMPUGNED LAND SOLD IN ASSESSMENT YEAR 2006 07 WAS SITUATED WITHIN 8 KM OR BEYOND 8 KM OF THE LIMITS OF THE MUNICIPAL CORPORATION. THEREFORE, ACCORDING TO US THE ASSESSING OFFICER HAS ALLOWED THE SET - OFF OF THE LOSS TO THE ASSESSEE WITHOUT EXAMINING THE FACTS AT ALL. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE ORDER OF THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE TO THAT EXTENT. C) WITH RESPECT TO THE CAPITAL GAIN ON SALE OF SHARES OF A COMPANY THE LD. ASSESSING OFFICER HAS ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 10 (38) OF THE INCOME TAX ACT WITHOUT EXAMINING WHETHER THE SECURITY TRANSACTION TAX HAS BEEN PAID ON THE SALE OF THE SHARES OR NOT. THE QUERY LETTER WHICH HAS BEEN RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE AT PAGE NO. 38 OF THE PAPER BOOK ONLY SHOWS THAT THE ASSESSING OFFICER HAS ENQUIRED ABOUT THE DETAILS ABOUT ACQUISITION OF THOS E SOURCE AND MODE OF PAYMENT FOR ACQUISITION OF THE SAME AS WELL AS EVIDENCE FOR SALE OF SHARES AND MODE OF RECEIPT OF SALE PROCEEDS. ACCORDING TO US THESE ARE NOT THE NECESSARY ENQUIRIES TO BE MADE FOR THE PURPOSE OF EXEMPTION TO BE GRANTED TO THE ASSESSE E UNDER SECTION 10 (38) OF THE INCOME TAX ACT. IN VIEW OF THIS THE ORDER OF THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE TO THAT EXTENT. 7. IN OUR FINDING WE ALSO DRAW SUPPORT FROM THE ORDER OF THE COORDINATE BENCH IN CASE OF AN N IIT VERSUS CIT 60 TAXMANN.COM 313 WHEREIN IT HAS BEEN HELD AS UNDER: - 28. WE HAVE CONSIDERED THE DETAILED SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE KEEPING IN VIEW THE VARIOUS AUTHORITATIVE PRONOUNCEMENTS IN THIS REGARD. THERE CANNOT BE ANY QUARREL WITH THE LEGAL PROPOSITIONS, AS ADVANCED BY BOTH THE PARTIES. IT HAS CONSISTENTLY BEEN HELD THAT IF THE AO'S CONCLUSION IS ARRIVED AT AFTER DU E APPLICATION OF MIND ON A PARTICULAR ISSUE, THEN THE ORDER CANNOT BE SAID TO BE ERRONEOUS. 'DUE APPLICATION OF MIND' IMPLIES THAT IF THE ASSESSEE HAS MERELY RESPONDED TO THE AO'S QUERY AND THE AO, WITHOUT PROPER VERIFICATION OF REPLIES, ACCEPTS THE SAME, THEN, IT CANNOT BE SAID TO BE A CASE OF DUE APPLICATION OF MIND. 28.1 LD. SPECIAL COUNSEL HAS RIGHTLY POINTED OUT THAT THE EXPRESSION, 'INQUIRY', 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY', HAVE NOT BEEN DEFINED AND, THEREFORE, WHEN THE ACTION OF THE AO WO ULD BE SUGGESTIVE OF LACK OF INQUIRY OR INADEQUATE INQUIRY, WILL DEPEND UPON THE FACTS OBTAINING IN A PARTICULAR CASE. WHAT EMERGES AS A BROAD PRINCIPLE FROM THE VARIOUS DECISIONS IS THAT WHERE THE AO HAS REACHED A RATIONAL CONCLUSION, BASED ON HIS INQUIRI ES AND MATERIAL ON RECORD, THE COMMISSIONER SHOULD NOT START THE MATTER AFRESH IN A WAY AS TO QUESTION THE MANNER OF HIS CONDUCTING INQUIRIES. IT IS NOT THE PROVINCE OF THE COMMISSIONER TO ENTER INTO THE MERITS OF EVIDENCE; IT HAS ONLY TO SEE WHETHER THE R EQUIREMENTS OF ESSENTIAL INQUIRES AND OF LAW HAVE BEEN DULY AND PROPERLY COMPLIED WITH BY AO OR NOT. 28.2 IT IS WELL SETTLED THAT BEFORE THE COMMISSIONER CAN INVOKE HIS POWERS U/S 263, HE HAS TO ARRIVE AT A CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO AS FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEN ONLY THE POWERS U/S 263 CAN BE INVOKED. THEREFORE, IF AO ACCEPTS OR REJECTS ANY CLAIM OF THE ASSESSEE WITHOUT DUE APPLICATION OF MIND AND IF SUCH FAILURE CAUSES PREJUDICE TO REVENUE, THE COMMISSIONER WOULD BE WELL WITHIN HIS POWERS U/S 263 TO INTERVENE IN THE MATTER. AN INQUIRY WHICH IS JUST FARCE OR MERE PRETENCE OF INQUIRY, CANNOT BE SAID TO BE AN INQUIRY AT ALL, MUCH LESS AN INQUIRY NEEDED TO REACH THE LEVEL OF SATISFACTION OF THE AO ON THE GIVEN ISSUE. THE LEVEL OF SATISFACTION WOULD OBVIOUSLY MEAN THAT HE HAS CONDUCTED THE INQUIRY IN A MANNER WHEREBY HE PLACES ON RECORD THE MATERIAL ENOUGH TO REACH THE SATISFACTION, WHICH A RATIONAL PERSON, BEING INFORMED OF THE NUANCES OF TAX LAW S WOULD REACH AFTER DUE APPRECIATION OF SUCH MATERIAL. IF THIS COMPONENT IS MISSING, IT WILL ALWAYS BE A CASE OF LACK OF INQUIRY AND NOT INADEQUATE INQUIRY. WE FIND THAT LD. COMMISSIONER, WHILE CONSIDERING THIS ARGUMENT OF ASSESSEE HAS OBSERVED THAT THE RE PRESENTATIVE OF THE ASSESSEE WAS ASSURED THAT THIS ISSUE WILL BE CONSIDERED WITH INDEPENDENT APPLICATION OF MIND WHILE PASSING THE ORDER U/S 263. THEREFORE, WHEN SPECIFIC ISSUES WILL BE CONSIDERED, IT WILL BE EXAMINED WHETHER THE AO HAD REACHED THE LEVEL O F SATISFACTION BY CARRYING OUT NECESSARY INQUIRIES QUA THAT ISSUE OR NOT. GROUND IS DISPOSED OF ACCORDINGLY. 8. ACCORDING TO US IN THE PRESENT CASE THE ASSESSMENT PROCEEDINGS CONDUCTED BY THE LD. ASSESSING OFFICER CLEARLY FALLS WITHIN THE PARAMETERS OF LAC K OF INQUIRY. THEREFORE THERE CANNOT BE ANY FAULT FOUND WITH THE ORDER OF THE LD. CIT IN ASSUMING HIS JURISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT. IN VIEW OF OUR ABOVE FINDING WE DISMISS THE APPEAL OF THE ASSESSEE CHALLENGING THE ORDER OF LD. CIT UNDER SECTION 263 OF THE INCOME TAX ACT. ORDER PRONOUNCED IN THE OPEN COURT ON 20 /02/2017 . - SD/ - - SD/ - (KULDIP SINGH ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20 /02 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI