Ganapati Tradewings Pvt Ltd, Kolkata V. I.T.O Wd - 1(4),kolkata, Kolkata

ITA 2651/KOL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5636 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-09-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 27-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH KANOJIA
• Assessee Lawyers: S M SURANA
• Keywords: Business income; Revision of order; Principle of natural justice; Penny stocks; Set aside
• Section: 142(1); 14A; 143(2); 263

Judgement Text

1 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI A. T. VARKEY, JM & SHRI MANISH BORAD, AM] I.T.A. NO. 2651/KOL/2019 ASSESSMENT YEAR: 2014-15 M/S GANPATI TRADEWINGS PVT. LTD. (PAN: AABCG0884C) VS. ITO, WARD-1(4), KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 08.09.2021 DATE OF PRONOUNCEMENT 17.09.2021 FOR THE APPELLANT SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT SHRI MANISH KANOJIA, DR ORDER PER SHRI A. T. VARKEY, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. PCIT-1, KOLKATA DATED 25.03.2019 PASSED U/S 263 OF INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2014-15. 2. BY PREFERRING THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE JURISDICTION OF LD. PCIT TO INVOKE THE REVISIONAL JURISDICTION U/S 263 OF THE ACT AGAINST THE ASSESSMENT ORDER PASSED BY THE AO DATED 21.12.2016. ACCORDING TO LD. A.R., SHRI S. M. SURANA, THE LD. PCIT HAS ERRONEOUSLY INVOKED THE JURISDICTION U/S 263 WITHOUT SATISFYING THE CONDITION PRECEDENT AS STIPULATED U/S 263 OF THE ACT. CONSEQUENTLY, ACCORDING TO HIM, THE IMPUGNED ORDER OF LD. PCIT HAS BEEN PASSED WITHOUT REQUISITE JURISDICTION AND, THEREFORE, NULL IN THE EYES OF LAW. 3. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE DECLARED TOTAL INCOME OF RS. 10,19,920/- FOR AY 2014-15 AND THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS (COMPUTER AIDED SCRUTINY SELECTION), INTER ALIA, FOR THE LOSS IN SHARES ALSO. ACCORDING TO LD. A.R., THE AO AFTER ISSUING NOTICE U/S 143(2) DATED 10.09.2015 AND NOTICE U/S 142(1) DATED 05.07.2016/25.11.2016 WHEREIN THE AO HAD ASKED FOR THE DETAILS IN RESPECT OF SHORT TERM 2 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 CAPITAL LOSS/GAIN/BUSINESS LOSS ON ACCOUNT OF DEALING IN SHARES IN FY 2013-14(AY 2014-15) IN THE FORMAT ASKED U/S 142(1) OF THE ACT WITH DOCUMENTARY EVIDENCE LIKE DEMAT ACCOUNT, CONTRACT NOTES AND LEDGER ACCOUNT OF SHARE BROKERS WHEREBY THE AO ASKED FOR SPECIFIC DETAILS LIKE NAME OF SHARES, OPENING STOCK, DATE OF PURCHASE AND SALES, CLOSING STOCK, P&L ACCOUNT, REMARKS, QUANTITY, LOADING, TOTAL VALUE OF SHARES AND THEREAFTER AGAIN TAKING NOTE OF THE DETAILED REPLY OF THE ASSESSEE ALONG WITH THE SUPPORTING DOCUMENTS FILED ALONG WITH SUPPORTING DOCUMENTS FILED DURING THE ASSESSMENT PROCEEDINGS, THE AO BEING SATISFIED DID NOT DRAW ANY ADVERSE INFERENCE/VIEW AGAINST THE CLAIM MADE BY THE ASSESSEE ON THIS ISSUE OF LOSS IN SHARE TRADING (SHORT TERM CAPITAL LOSS) AND PASSED AN ASSESSMENT ORDER DATED 21.12.2016 MAKING FURTHER AN ADDITION OF RS. 2,45,948/- U/S 14A OF THE ACT AND COMPUTED THE TOTAL INCOME AT RS.12,65,870/-. THEREAFTER, THE LD. PCIT-1, KOLKATA PROPOSED TO INTERFERE WITH THE ASSESSMENT ORDER BY EXERCISING HIS REVISIONAL POWER U/S 263 OF THE ACT ON THE ISSUE OF SHORT TERM CAPITAL LOSS ON THE THREE SCRIPS VIZ., M/S. RUTORN INTERNATIONAL LTD., M/S. GLOBAL INFRATECH & FINANCE LTD. AND M/S. S R K INDUSTRIES LTD. (HEREINAFTER REFERRED TO AS THE SCRIPS). ACCORDING TO LD. PCIT, THESE ARE PENNY STOCKS AS PER THE REPORT OF THE DIRECTORATE OF INVESTIGATION AND CBDTS CIRCULAR DATED 16.03.2016 WHICH DEBARS SHORT TERM CAPITAL LOSS ARISING FROM THE TRANSACTION OF SUCH PENNY STOCK. ACCORDING TO LD. PCIT, THE SHORT TERM CAPITAL LOSS OF RS.89,11,796/- ARISING FROM PENNY STOCK TRANSACTION CANNOT BE SET OFF WITH OTHER BUSINESS INCOME, HENCE THE CLAIM AS ALLOWED BY THE AO WAS IRREGULAR ADJUSTMENT. ACCORDING TO LD. PCIT, THE CBDT HAS CIRCULATED LIST OF PENNY STOCK COMPANIES WHEREIN THE NAMES OF THREE COMPANIES, WHOSE SHARES ASSESSEE HAD PURCHASED AND SOLD FIGURED. ACCORDING TO THE LD. PCIT, IT WAS FOUND THAT SUCH COMPANIES WERE DELISTED FROM THE MAJOR STOCK EXCHANGES AND IN THIS FACTUAL BACKGROUND THE CBDT CIRCULAR, THE AO SUPPOSED TO HAVE MADE INDEPENDENT INVESTIGATION IN DEPTH AND THE AO ERRED IN MERELY RELYING ON THE DOCUMENTS FILED BY THE ASSESSEE TO ACCEPT THE CLAIM OF LOSS. HENCE, ACCORDING TO LD. PCIT, THIS IS A CASE OF NON-APPLICATION OF MIND OF THE AO AND LACK OF PROPER ENQUIRY ON HIS PART. THEREFORE, HE WAS PLEASED TO SET ASIDE THE ASSESSMENT ORDER DATED 21.12.2016 AND DIRECTED THE AO TO PASS FRESH ASSESSMENT ORDER IN ACCORDANCE TO LAW. 4. AGGRIEVED BY THE AFORESAID ACTION OF LD. PCIT, THE ASSESSEE IS BEFORE US. 3 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE NOTE THAT ASSESSMENT ORDER PASSED BY THE AO DATED 21.12.2016 FOR AY 2014-15 HAS BEEN INTERDICTED BY THE LD. PCIT BY EXERCISING HIS REVISIONAL JURISDICTION U/S 263 OF THE ACT BY HOLDING THE AOS ORDER TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE ON THE ISSUE OF SHORT TERM CAPITAL LOSS FROM THREE SCRIPS (SUPRA). ACCORDING TO LD. PCIT, THE AO HAS NOT ENQUIRED INTO THIS ISSUE MAKING THE ORDER PASSED BY THE AO ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. HOWEVER ACCORDING TO THE ASSESSEE, THE AO HAD DULY CARRIED OUT ENQUIRY INTO THE ISSUE OF BUSINESS LOSS ON THE SCRIPS WHICH ARE ALLEGED BY THE LD. PCIT NOT TO HAVE BEEN ENQUIRED BY ISSUING NOTICE U/S 142(1) OF THE ACT ON 05.07.2016 & 25.11.2016 AND PURSUANT TO WHICH THE ASSESSEE HAD REPLIED ON 29.07.2016 & 30.08.2016 AND ON 01.12.2016 ALONG WITH SUPPORTING DOCUMENTS LIKE DEMAT ACCOUNT, CONTRACT NOTE AND LEDGER ACCOUNT OF SHARE BROKER ETC. SO, ACCORDING TO ASSESSEE, THE AO AFTER HAVING THROUGH ENQUIRED AND HAVING GONE THROUGH THE REPLY OF THE ASSESSEE TO THE SPECIFIC QUERIES RAISED BY THE AO ON THIS ISSUE AND AFTER PERUSAL AND VERIFICATION OF THE DOCUMENTS FILED ON THE ISSUE, AND AFTER VERIFYING THAT SALE/PURCHASE OF THE SCRIPS WERE IN CONFORMITY WITH THE MARKET RATES, TRANSACTIONS THROUGH REGISTERED MEMBERS OF STOCK EXCHANGE AND THROUGH ACCOUNT PAYEE CHEQUES AND AFTER BEING SATISFIED THE AO HAD ACCEPTED THE TRANSACTION ON WHICH THE ASSESSEE CLAIMED THE BUSINESS LOSS AS PER CIRCULAR NO. 6 OF 2016 OF THE CBDT DATED 29 TH FEBRUARY, 2016. AND THEREFORE THE ACTION OF AO CANNOT BE TERMED AS A CASE OF NO-ENQUIRY ON THE ISSUE OF BUSINESS LOSS ON THE SCRIPS AS CLAIMED BY THE ASSESSEE, AND SO, ACCORDING TO ASSESSEE, THE LD. PCIT ERRED IN HIS FACTUAL ASSUMPTION ON THIS ISSUE, I.E, THE AO HAS NOT CONDUCTED ANY ENQUIRY OF SHORT TERM CAPITAL LOSS WHEREAS ASSESSEE HAS CLAIMED BUSINESS LOSS, SINCE ASSESSEE IS IN TO THE BUSINESS OF PURCHASE & SALE OF SHARE REVENUE OF RS. 62,89,381/- WHICH HAS BEEN ACCEPTED BY AO AS WELL AS LD. PCIT AS BUSINESS RECEIPT. THUS ACCORDING TO THE ASSESSEE, THE AO HAS DISCHARGED HIS ROLE OF THE INVESTIGATOR AND AN ADJUDICATOR WHILE FRAMING THE SCRUTINY ASSESSMENT ORDER AND NO FAULT ON THIS SCORE (I.E. ENQUIRY) OF THIS ISSUE CAN BE ATTRIBUTED ON THE AO ON THE ISSUE OF LOSS FROM SALE OF SHARES. THEREFORE, ACCORDING TO LD. AR, THE JURISDICTIONAL CONDITION PRECEDENT TO INVOKE THE REVISIONAL JURISDICTION U/S 263 WAS ON WRONG FOOTING AND ERRONEOUS ASSUMPTION OF FACTS, THEREFORE, THE LD. PCITS ACTION IS BAD IN LAW. 4 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 6. BEFORE WE ADVERT TO THE FACTS AND LAW INVOLVED IN THIS LIS BEFORE US, LET US REVISIT THE LAW GOVERNING THE ISSUE BEFORE US. THE ASSESSEE HAS CHALLENGED IN THE FIRST PLACE, THE VERY USURPATION OF JURISDICTION BY LD. PRINCIPAL CIT TO INVOKE HIS REVISIONAL POWERS ENJOYED U/S 263 OF THE ACT. THEREFORE, FIRST WE HAVE TO SEE WHETHER THE REQUISITE JURISDICTION NECESSARY TO ASSUME REVISIONAL JURISDICTION IS EXISTING IN THIS CASE BEFORE THE PR. CIT RIGHTFULLY EXERCISES HIS REVISIONAL POWER. FOR THAT, WE HAVE TO EXAMINE AS TO WHETHER IN THE FIRST PLACE THE ORDER OF THE ASSESSING OFFICER FOUND FAULT BY THE PRINCIPAL CIT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THAT, LET US TAKE THE GUIDANCE OF JUDICIAL PRECEDENCE LAID DOWN BY THE HONBLE APEX COURT IN MALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 83(SC) WHEREIN THEIR LORDSHIP HAVE HELD THAT TWIN CONDITIONS NEEDS TO BE SATISFIED BEFORE EXERCISING REVISIONAL JURISDICTION U/S 263 OF THE ACT BY THE CIT. THE TWIN CONDITIONS ARE THAT THE ORDER OF THE ASSESSING OFFICER MUST BE ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE FOLLOWING CIRCUMSTANCES, THE ORDER OF THE AO CAN BE HELD TO BE ERRONEOUS ORDER, THAT IS (I) IF THE ASSESSING OFFICERS ORDER WAS PASSED ON INCORRECT ASSUMPTION OF FACT; OR (II) INCORRECT APPLICATION OF LAW; OR (III)ASSESSING OFFICERS ORDER IS IN VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE; OR (IV) IF THE ORDER IS PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND; (V) IF THE AO HAS NOT INVESTIGATED THE ISSUE BEFORE HIM;[ BECAUSE AO HAS TO DISCHARGE DUAL ROLE OF AN INVESTIGATOR AS WELL AS THAT OF AN ADJUDICATOR ]THEN IN AFORESAID ANY EVENT THE ORDER PASSED BY THE ASSESSING OFFICER CAN BE TERMED AS ERRONEOUS ORDER. COMING NEXT TO THE SECOND LIMB, WHICH IS REQUIRED TO BE EXAMINED AS TO WHETHER THE ACTIONS OF THE AO CAN BE TERMED AS PREJUDICIAL TO THE INTEREST OF REVENUE. WHEN THIS ASPECT IS EXAMINED ONE HAS TO UNDERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HELD THAT THIS PHRASE I.E. PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. THEIR LORDSHIP HELD THAT IT HAS TO BE REMEMBERED THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSING OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS TO THE REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 5 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 7. IN ORDER TO ADJUDICATE THIS ISSUE AS TO WHETHER THE LD. PCIT HAD SATISFIED THE PRE- CONDITION FOR INVOKING THE REVISIONAL JURISDICTION U/S 263 OF THE ACT, WE HAVE TO SEE, WHETHER THE AO HAS EXERCISED HIS DUAL ROLE AS AN INVESTIGATOR AND AS AN ADJUDICATOR ON THE ISSUE RAISED BY THE LD. PCIT. ACCORDING TO LD. PCIT, THE AO HAS NOT CARRIED OUT PROPER ENQUIRY IN RESPECT OF THE SHORT TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE ON THE THREE SCRIPS (SUPRA) IN THE LIGHT OF THE CBDT CIRCULAR DATED 16.03.2016. NOW WE HAVE TO SEE WHETHER THE LD. PCIT IS CORRECT OR NOT ON THIS FAULT. FOR THAT THE LD. AR HAS DRAWN OUR ATTENTION TO PAGE 61 OF THE PB WHEREIN THE NOTICE ISSUED BY THE AO U/S 142(1) DATED 05.07.2016 TO FURNISH THE DETAILS OF SHORT TERM CAPITAL LOSS/GAIN/BUSINESS LOSS. PURSUANT TO WHICH THE ASSESSEE REPLIED VIDE LETTER DATED 27.07.2016 WHEREIN IT FILED THE DETAILS OF BUSINESS LOSS ALONG WITH CONTRACT NOTES, DEMAT ACCOUNT BANK STATEMENT ETC. THEREAFTER, THE AO ISSUED NOTICE U/S. 142(1) OF THE ACT DATED 25.08.2016 WHEREIN THE AO ASKED THE ASSESSEE TO FURNISH THE FOLLOWING SPECIFIC DETAILS VIDE ITEM NO. 11 AND ALSO THE ASSESSEE WAS DIRECTED TO FILE THE DETAILS OF GAIN/LOSS ON ACCOUNT OF DEALING IN SHARES DURING THE FY 2013-14 WITH DOCUMENTARY EVIDENCE LIKE DE MAT ACCOUNT, CONTRACT NOTES AND LEDGER ACCOUNT OF THE SHARE BROKERS WHICH READS AS UNDER: 1. NAME OF SHARES 2. OPENING STOCK (A) DATE OF PURCHASE (B) QUANTITY (C) RATE (D) TOTAL VALUE 3. PURCHASE (A) DATE OF PURCHASE (B) QUANTITY (C) RATE (D) TOTAL VALUE 4. SALES (A) DATE OF SALE 6 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 (B) QUANTITY (C) RATE (D) TOTAL VALUE 5. CLOSING STOCK (A) DATE OF PURCHASE (B) QUANTITY (C) RATE (D) TOTAL VALUE 6. PROFIT/LOSS 7. REMARKS 8. FROM A PERUSAL OF THE QUESTION NO.11 (SUPRA), WE NOTE THAT THE AO HAS ASKED FOR THE DETAILS OF INVESTMENT IN EQUITY SHARES AND ASKED THE SPECIFIC DETAILS REGARDING THE SAME ARE DISCERNIBLE FROM THE AFORESAID QUESTION (1) TO (6). AND THE AO HAD ASKED VIDE NOTICE U/S 142(1) DATED 5.07.2016 (REFER PAGE 60 PB) HAD ASKED VIDE QUESTION NO. (6) (REFER PAGE 61 PB) HAD ASKED THE ASSESSEE TO FURNISH THE DETAILS IN RESPECT OF LOSS AND ALSO ASKED FOR SPECIFIC DETAILS PERTAINING TO IT WHICH ARE ENUMERATED FROM QUERIES RAISED FROM CLAUSE (1) TO (6) SUPRA AND FURTHER THE AO ALSO HAS DIRECTED THE ASSESSEE TO FURNISH THE EVIDENCE OF MODE OF SUCH PAYMENT ALONG WITH DETAILS OF CHEQUE NUMBERS AND THE COPY OF BANK STATEMENT HIGHLIGHTING THE RELEVANT ENTRIES EVIDENCING THE TRANSACTION. WE NOTE THAT THE ASSESSEE HAD FILED THE REPLY TO THE AOS NOTICE DATED 25.08.2016 ON 30.08.2016 WHICH IS FOUND PLACED AT PAGE 27 ALONG WITH SUPPORTING DOCUMENTS CALLED FOR BY THE AO WHICH EVIDENCES SUPPORT TRANSACTION IN SHARES WHICH RESULTED IN LOSS. AND FROM A PERUSAL OF THE REPLY OF THE ASSESSEE TO THE AO, IT IS NOTED THAT THE ASSESSEE HAD FILED, INTER ALIA, THE DETAILS OF PURCHASE AND SALE OF SHARES IN QUESTION ALONG WITH COPY OF DEMAT ACCOUNT, CONTRACT NOTES ,BILLS, COPY OF BANK STATEMENTS AND THUS ALONG WITH THE REPLY TO THE NOTICE OF AO, THE ASSESSEE HAD FILED THE DETAILS OF LOSS ALONG WITH SUPPORTING MATERIAL. THEREAFTER THE AO HAS PASSED THE ASSESSMENT ORDER WITHOUT DRAWING ANY ADVERSE VIEW. IN THE AFORESAID SCENARIO THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT THE AO HAVING GONE THROUGH THE REPLY AND THE SUPPORTING MATERIAL BEING SATISFIED THAT THE ASSESSEE BEING AN NBFC COMPANY, HAVING MAIN BUSINESS OF PROVIDING FINANCE & TRADING IN SHARES & SECURITIES HAD SHOWN TO 7 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 HAVE EARNED REVENUE FROM SALE OF SHARES OF RS. 62,39,881/- AND CLAIMED BUSINESS LOSS OF RS. 89,11,796/- FROM SALE OF THREE (3) SCRIPS WAS ACCEPTED WHICH WE NOTE IS IN CONSONANCE WITH CBDT CIRCULAR NO. 6/2016 DATED 29 TH FEBRUARY, 2016 AND THEREFORE THE AO HAS NOT PREFERRED TO DRAW ANY ADVERSE VIEW AGAINST THE CLAIM OF THE ASSESSEE IN RESPECT OF CLAIM OF BUSINESS LOSS FROM THE SALE OF THREE SCRIPS. THEREFORE, THE ALLEGATION ON THE BASIS OF WHICH THE LD. PCIT WANTED TO INTERFERE IN THE AOS ORDER I.E. THE NON-ENQUIRY BY THE AO ON THE CLAIM OF THE BUSINESS LOSS ON THESE SCRIPS IS ERRONEOUS SINCE WE HAVE ALREADY DISCUSSED FROM THE QUERIES RAISED IN THE NOTICE U/S. 142(1) OF THE ACT, WHEREIN DETAILS IN RESPECT OF LOSS WERE CALLED FOR AND SPECIFIC DETAILS OF WHICH HAVE BEEN ELICITED BY THE AO IN RESPECT OF THE BUSINESS LOSS CLAIMED AS WELL AS THAT OF THE DETAILS OF INVESTMENT IN EQUITY SHARES WERE ENQUIRED AND COLLECTED IN THAT PROCESS. SINCE THE AO HAD ISSUED THE NOTICE U/S. 142(1) OF THE ACT ON 05.07.2016/25.08.2016 IT IS PRESUMED THAT THE AO WAS AWARE OF THE REPORT OF DIRECTORATE OF INVESTIGATION AND ALSO THE CBDT ORDER NO. F NO. 287/30/2014-IT(INV.II)- VOL-III DATED 16.03.2016 WHEREIN THE INVESTIGATION WING HAS ALERTED THE FIELD OFFICERS IN RESPECT OF CERTAIN NEFARIOUS ACTIVITIES INVOLVING BUSINESS OF PENNY STOCKS. THIS PRESUMPTION OF FACT IS BASED ON THE FACTUAL MATRIX WHICH IS EVIDENT FROM A PERUSAL OF THE NOTICE ISSUED BY AO U/S. 142(1) OF THE ACT DATED 05.07.2016/25.08.2016 WHICH HAVE PROMPTED HIM TO ASK SUCH DETAILED QUESTIONS IN ORDER TO ELICIT ANSWERS FOR IT ALONG WITH SUPPORTING MATERIAL/DOCUMENTS TO SUBSTANTIATE THE CLAIM OF LOSS ON SCRIPS AND FRO THIS PRESUMPTIONS OF FACT WE TAKE THE AID OF SECTION 114(E) OF INDIAN EVIDENCE ACT, 1872 WHEREIN THE COURT/TRIBUNAL MAY PRESUME THE EXISTENCE OF ANY FACT WHICH IT THINKS LIKELY TO HAVE HAPPENED, REGARD BEING HAD TO THE COMMON COURSE OF NATURAL EVENTS, HUMAN CONDUCT IN THEIR RELATION TO THE FACTS OF THE PARTICULAR CASE. AND THE ILLUSTRATION (E) TO SECTION 114 OF THE INDIAN EVIDENCE ACT EMPOWERS DISCRETION TO THE COURT/TRIBUNAL TO PRESUME THE EXISTENCE OF FACT THAT OFFICIAL/QUASI JUDICIAL/JUDICIAL ACTS HAVE REGULARLY BEEN PERFORMED. HOWEVER, BEFORE WE DRAW SUCH A PRESUMPTION WE ALSO SHOULD HAVE REGARD TO SUCH FACT AS TO WHETHER THE OFFICIAL ACT, THE REGULARITY WHICH WAS IN QUESTION WAS PERFORMED UNDER EXCEPTIONAL CIRCUMSTANCES. WHEN WE CONSIDER THIS ASPECT ALSO WE NOTE THAT NO EXCEPTIONAL CIRCUMSTANCES IN RESPECT OF THE ACTION OF AO WHILE ENQUIRING INTO THE ISSUE OF LOSS WERE CITED BY THE LD. PCIT IN HIS IMPUGNED ORDER OR THE LD. DR. SO, WE PRESUME THE FACT THAT AO WAS AWARE OF THE CONTENTS OF THE CIRCULAR OF CBDT REGARDING PENNY STOCK AND THEREAFTER 8 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 HAD ISSUED NOTICE U/S. 142(1) OF THE ACT (SUPRA) AND HAS ACCEPTED THE CLAIM OF BUSINESS LOSS AND IN CONSONANCE WITH THE CBDT CIRCULAR NO. 6/2016 DATED 29 TH FEBRUARY, 2016. THUS INVOKING EXPLANATION 2(C) OF SECTION 263 OF THE ACT IS NOT CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. PCIT OTHER THAN REFERRING TO THE CBDT ORDER DATED 16.03.2016 HAS NOT BOTHERED TO REFER TO ANY COGENT MATERIAL ON THE BASIS IT CAN BE SAID THAT THESE THREE SCRIPS IN QUESTION ARE PENNY STOCK. THEREFORE, THE ASSUMPTION OF LD. PCIT IS BASED ON SURMISES AND CONJECTURES AND IT IS SETTLED PRINCIPLE OF LAW THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE/PROOF. AND, IT IS INTERESTING TO NOTE THAT IN THIS CASE, THE ASSESSEE AN NBFC HAS SHOWN REVENUE FROM SALE OF SHARES TO THE TUNE OF RS. 62,39,881/- WHICH HAS NOT BEEN FOUND FAULT BY THE LD. PCIT, WHEREAS THE LOSS CLAIMED FROM SALE OF SHARES HAVE BEEN FOUND TO BE AT FAULT FOR AO NOT CONDUCTING PROPER ENQUIRY I.E. LD. PCIT WAS AWARE THAT ENQUIRY WAS CONDUCTED SO IT IS A CASE OF INADEQUATE ENQUIRY BY THE LD. PCIT ITSELF. IN SUCH A SCENARIO, THE LD. PCIT OUGHT TO HAVE CONDUCTED ENQUIRY BY HIMSELF AND RECORDED HIS FINDING AS TO HOW THE AO ERRED IN HIS ROLE AS AN INVESTIGATOR AND ALSO MUST BE ABLE TO DEMONSTRATE HOW THE VIEW OF AO ON THE FACTS OF THE CASE WAS UNSUSTAINABLE IN LAW. SINCE THE LD. PCIT HAS NOT DONE SUCH AN EXERCISE, AND IN THE LIGHT OF THE DISCUSSION (SUPRA), AND CONSIDERING THE ENQUIRY MADE BY AO ON THE ISSUE, WE PRESUME THAT THE AO HAS DISCHARGED HIS DUTY AS AN INVESTIGATOR ON THE ISSUE OF LOSS ON THE SCRIPS IN QUESTION AND AFTER TAKING NOTE OF CBDT CIRCULAR NO. 287/30/2014-IT(INV.II)-VOL-III DATED 16.03.2016 ON PENNY STOCK AND THEREAFTER CONDUCTED THE ENQUIRY. AND AFTER PERUSAL OF THE REPLY OF THE ASSESSEE TO THE SPECIFIC QUERIES AND DETAILS CALLED FOR AND AFTER PERUSAL OF THE SUPPORTING MATERIALS, THE AO BEING SATISFIED HAS ACCEPTED THE CLAIM OF ASSESSEE IN RESPECT OF LOSS ON THESE SCRIPS. THEREFORE THE AOS ACTION OF ACCEPTING LOSS ON THE THREE (3) SCRIPS CANNOT BE TERMED AS A CASE OF NO-ENQUIRY ON THE PART OF THE AO AND IS IN LINE WITH CBDT CIRCULAR NO. 6/2016 DATED 29 TH FEBRUARY, 2016 WHICH IS ON THE SUBJECT MATTER DISCUSSED SUPRA AND THE LD. PCITS OPINION THAT AMENDMENT MADE IN SECTION 263 W.E.F. 01.06.2015 IS APPLICABLE MEANING THOUGH NOT EXPRESSED BY THE LD. PCIT WHAT HE INTENDS IS THAT EXPLANATION 2(C ) OF SECTION 263 OF THE ACT IS ATTRACTED WHICH ACCORDING TO US IS WRONG IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES AS AFORESTATED. IN SUCH A SCENARIO, THE PRE-CONDITION TO INVOKE REVISIONAL JURISDICTION U/S 263 OF THE ACT IS ABSENT AND THEREFORE THE LD. PCIT HAS INVOKED THE JURISDICTION WITHOUT SATISFYING THE CONDITION PRECEDENT I.E. THE AOS ACTION SHOULD BE VALIDLY 9 ITA NO. 2651/KOL/2019 M/S. GANPATI TRADEWINGS PVT. LTD., AY2014-15 HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. THEREFORE, THE IMPUGNED ACTION OF LD. PCIT IS WITHOUT JURISDICTION AND THEREFORE THE IMPUGNED ORDER IS NULLIFY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2021 SD/- SD/- (MANISH BORAD) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17TH SEPTEMBER,2021 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- M/S. GANPATI TRADEWINGS PVT. LTD., C/O RAJESH MOHAN & ASSOCIATES, UNIT NO. 18, 5 TH FLOOR, BAGATI HOUSE, 34, GANESH CHANDRA AVENUE, KOLKATA0700 013. 2. RESPONDENT ITO, WARD-1(4), KOLKATA 3. THE PCIT- 1, KOLKATA 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES, KOLKATA