Facit Sales(P) Ltd., Kolkata V. PCIT, Kol-5, Kolkata

ITA 406/KOL/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5383 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 29-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Period of limitation; Question of law; Accommodation entries; Assessment record; Condonation of delay; Set aside
• Section: 147; 148; 54; 263; 2; 143(3); 54F; 142(1); 143(1); 143(2); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA [Virtual Court] (Before Sri Sanjay Garg, Judicial Member & Sri Manish Borad, Accountant Member) I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited.............................................Appellant [PAN: AAACF 4361 Q] Vs. Pr. Commissioner of Income Tax-5, Kolkata.........................Respondent Appearances by: Sh. S.K. Tulsiyan, Adv. and Ms. Mita Rizvi, appeared on behalf of the Assessee. Md. Ghayas Uddin, CIT(D/R), appeared on behalf of the Revenue. Date of concluding the hearing : February 15 th , 2022 Date of pronouncing the order : March 31 st , 2022 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2010-11 is directed against the order of ld. Pr. Commissioner of Income-tax-5, Kolkata [in short ld. “Pr. CIT”] dated 16.03.2020 vide Document No. (DIN) ITBA/REV/M/REV5/2019-20/1026686334(1) which is arising out of the assessment order framed u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 29.12.2017 by ITO, Ward-15(1), Kolkata. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. That, on the facts and in the circumstances of the case, the Ld. Principal CIT, Kolkata-5 erred in law in assuming jurisdiction u/s.263 of the Act in order to impose his own views on the Ld. A.O. simply by differing with his plausible view when the Ld. A.O. after scrutiny of the details and various documents requisitioned u/s. 142(1) in respect of receipt on sale of shares to M/s. Igloo Vanijya Pvt. Ltd. (YCL) had taken a possible view, which did not suffer from lack of independent and adequate enquiry. 2 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. 2. That the Ld. Pr. CIT further erred in holding the assessment order passed u/s. 143(3)/147 to be erroneous and prejudicial to the interest of revenue only on the alleged premise that the order was passed without making any addition and hence the issue of receipt of Rs.5,00,000/- from YCL on sale of investment in shares was not at all examined by the Ld. A.O. when the reasons for selection of limited scrutiny was about the assessee being a ‘beneficiary of unaccounted cash of Rs.5,00,000/-‘ and after appropriate enquiry, the assessment order was passed by taking a plausible view. 3. That, the Ld. Pr. CIT further erred in having held the assessment order u/s. 143(3)/147 erroneous and prejudicial to the interest of the revenue for alleged non-compliance of clause (a) of Explanation 2 to sec.263(1) of the Act in spite of the fact that the accounts of the appellant-NBFC were statutorily audited under the Companies as well as I.T. Act, the case was reopened on the basis of inputs received from DIT(Inv.) and after thorough examination of the related documents in respect of the assessee and YCL, the Ld. A.O. took a judicious view in the matter. 4. That, the Ld. Pr. CIT further erred in having invoked provisions of sec.263 of the Act in spite of the fact that he did not find any irregularity in the transaction with necessary details & evidences and the impugned assessment was not a case of ‘No Enquiry’ and none of the clauses of Explanation 2 to sec.263(l) stands fulfilled so as to render the assessee’s case getting subjected to revision u/s.263(l) of the Act by the Ld. Pr. CIT. 5. That, the Ld. Pr. CIT before invoking power u/s.263 of the Act ought to have considered that the business of the appellant-company being a NBFC also included trading in equity shares of other companies and hence the company during the normal course of its business of trading in shares sold 50,000 shares of M/s. Calcutta Gear Pvt. Ltd. at Rs.5,00,000/- to YCL and the A.O. has rightly accepted such genuine business transaction. 6. That, the order passed u/s.263 of the Act dated 16.03.2020 is beyond jurisdiction and hence liable to be quashed as bad in law inasmuch as the assessment order u/s.143(3)/147 passed keeping in view the objective of reopening of assessment was in the exclusive domain of the A.O. and the resultant order cannot be subjected to revision proceeding even if the Ld. Pr. CIT does not agree with the results of such enquiries and he has a different opinion in the matter. 7. That, therefore, as the impugned order passed u/s.143(3)/147 by the A.O. originally being neither erroneous nor prejudicial to the interest of the revenue, the Ld. Pr. CIT wrongly invoked jurisdiction u/s.263 of the Act by making allegation which is not supported by any evidence or by law and hence the order passed by him u/s. 263 of the Act dated 16.03.2020 may kindly be quashed and your appellant be given such relief(s) as prayed for. 8. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.” 3. At the outset the ld. Counsel for the assessee submitted that there is a delay of 45 days in filing of the appeal. This delay was stated to be neither 3 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. deliberate nor intentional but was due to the pandemic circumstances prevailing at that time. We take note of the pandemic situation where the movement of people were restricted and because of such practical situation, it was always not possible to follow the time of limitation regarding filing of appeal before various forums. This fact was also observed and taken cognizance of by the Hon’ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 8 th March, 2021. The assessee has also filed separately condonation petition. The ld. D/R agreed for the condonation of delay of 45 days. After hearing the parties and taking guidance from the decision of the Hon’ble Supreme Court (supra), we condone the delay of the assessee and proceed to hear the case on merits. 4. The Pr. CIT-5, Kolkata invokes the provisions of Section 263 of the Act and issued following show-cause notice to the assessee which is extracted for ready reference: “Related to the. Assessment year 2010-2011, your case was completed u/s. 147/143(3) of the Income Tax Act, 1961 on 29/12/2017 at an assessed income of Rs.20.097/- against the returned income of Rs.20,097/-. In order to judge the merit of the order passed by the Assessing officer, the assessment records were perused. The records available revealed that an amount of Rs.5,00,000/- was received from M/s. Igloo Vanijya Pvt. Ltd. against sale of Investment in share of M/s. Calcutta Gear Pvt. Ltd. by your concern which were not at all examined by the Assessing Officer while passing the assessment order u/s.143(3)/147 of the Income Tax Act, 1961. In view of the above facts, the order passed u/s. 147/143(3) of the Income Tax Act, 1961 on 29/12/2017 for Assessment Year 2010-2011 appears to be erroneous in so far as it is prejudicial to the interest of revenue on this point. In order to elicit your reaction, your case has been fixed for hearing u/s.263 of the Income Tax Act, 1961 at my chamber at Aayakar Bhawan Poorva, 6 th Floor, Room No-601 oh 31.01.2020 at 5.15 AM/PM. You are, therefore, requested to appear either in person or through your authorized representative to explain the above case lacuna in the said order with supporting documentary evidence. As the proceeding, is getting barred by limitation on 31/03/2010 your failure to respond to this notice will Compel the undersigned to take a decision on the merits of the case and the papers available with the department.” 5. Ld. Counsel for the assessee submitted the following written submissions: 4 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. “On the basis of information received from Deputy Director of Income Tax (Investigation), Unit-4(1), Kolkata it is found that there is cash deposits in an account of M/s. Vridhi Fashion bearing account No.037205002263 of ICICI Bank of dubious accounts. The Inv. Unit, Kolkata has informed that these accounts belonged, were mere paper concerns having no existence and real business. From the bank statement it was observed that cash was deposited in the accounts of M/s. Vridhi Fashion for Rs.5,00,000/- which is used for unaccounted trading and from the same has been utilized for providing accommodation entries of various places, i.e. Kolkata, Hyderabad, Rourkela, Patna, Ranchi, Jaipur, Nagpur, Varanasi, Katnie etc. The cash deposited in the accounts is transferred from various paper company/concerns and transfers followed by immediate transfer to interlinked account. On examination of bank statements of the assessee by the DDIT(Inv.), Unit-4(1), Kolkata that unaccounted cash has frequently deposited in the bank accounts on different dates and immediately transferred to the accounts of different beneficiaries. Moreover of unaccounted cash of Rs.5,00,000/-through banking channel and prepared in cash trail and beneficiaries have been identified. The beneficiaries have been identified based on the identity, genuineness and creditworthiness as ascertained from ITD data, MCA details and Directors profile. On the basis of nature of transactions reflected on their bank statements it is clear that the ultimate beneficiary is mentioned above and a sum of Rs.5,00,000/- as to high value cash deposited on different dates.” 3.2. In response to the said reasons recorded and notices issued u/s. 143(2) and 142(1) of the Act, the A/R of the appellant-company appeared on several dates of hearing and submitted written objections/explanations with the required information/evidences as per the said notices which, inter alia, included the following: Queries made during assessment proceeding Replies of the assessee with evidences Letter No. ITO/Wd- 15(l)/Kol/Reasons/2017-18/ 227 dated 18.10.2017 (P/B pages 1& 2) As per information from DDIT(Inv.), there is cash deposit of Rs.5,00,000/- in the account of Vridhi Fashion bearing A/c. No.037205002263 of ICICI Bank which is used for unaccounted trading and providing accommodation entries. On examination of the assessee’s bank account, DDIT(Inv.) found frequent deposits of unaccounted cash and as per cash trail the same stood transferred to the accounts of different beneficiaries. Therefore, the high value cash deposit of Rs.5,00,000/- on different dates Letter dated 13.11.2017 sent through Speed Post to the A.O. (P/B Page 3). That there is no transaction in our books with M/s. Vridhi Fashion. Request was also made to provide more details of transaction with date and amount of transaction to fulfil the queries. 5 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. during F.Y. 2009-10 was not commensurate with the assessee’s return of income. Vide notice u/s,142(l) dated 15.06.2017 and during the course of assessment proceeding, the Ld. A.O. called for various documents and information. [As listed in the next column and hence not repeated here]. (1) In response to 142(1) notice, the assessee vide letter dated 14.12.2017 (P/B pages 06-49) submitted the following details/ documents: a) ITR Acknowledgement & ITR in full set for AY 2010-11. b) Computation of income for A. Y. 2010- 11. c) The nature of business of the company is to finance and make investment in shares. d) Bank Statement showing the transaction. (2) Vide letter dated 18.12.2017 in response to 142(1) notice, the following documents/information were submitted (P/B pages 49-62): a) The company has no transaction with Vridhi Fashions. b) As per cash trail shown by the A.O., the company has received Rs.5,00,000/- from M/s. Igloo Vanijya Pvt. Ltd. on 13.11.2009. The said amount was received against sale of investment in shares of M/s. Calcutta Gear Pvt. Ltd. to the said company. c) Copy of share sale bill dated 12.11.2009. d) Copy of Ledger of M/s. Igloo Vanijya Pvt. Ltd. e) Incorporation Certificate of M/s. Igloo Vanijya Pvt. Ltd. f)) Bank Statement of M/s. Igloo Vanijya Pvt. Ltd. showing the transaction. 3.3. The aforesaid facts would further be evident from the assessment order u/s. 147/143(3) itself. The Ld. AO having taken note of every kind of details, evidences, audited books of account etc. submitted as above in response to notice u/s. 142(1) and also during the course of the assessment proceeding, after having examined/investigated each and every aspect as warranted for the impugned assessment proceeding and deemed fit and after being satisfied with the replies of the queries given by the A/R of the appellant on several dates of hearing vis-a- vis sale of shares, completed the assessment as per return with his following observation/finding vide assessment order u/s 143(3)/147 of the Act dated 29.12.2017 (P/B pages 91-95): “In response to the above notices, Shri Bijoy Kumar Authorized Representative of the Assessee Company, appeared time to tome to discuss the case. The A/R of the 6 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. assessee company was asked to produce relevant documents as per notice u/s. 142(1). The A/R of the assessee submitted necessary particulars as per requisition. Books of accounts were also produced. The case was discussed and the A/R of the assessee was heard. On examination of information brought on record and during the course of hearing in connection with assessment proceedings u/s 147 of the I.T.Act, 1961 for the A.Y. 2010-11 the A/R furnished submission wherefrom it is known that the assessee company has sold shares during the year and sum received against sale of investment in shares of Rs. 5,00,000/- was included in sale ledger/bill as reported in the Profit & Loss Account. ” On the above analysis of the case, perusal of the documents called for and furnished and considering the explanation of the A/R of the assessee, the Ld. A.O. considered it prudent to accept the sale of shares as genuine and consequently the assessment was completed on the income returned by the appellant. Therefore, the order passed by the A.O. is neither erroneous nor prejudicial to the interest of the revenue.” 5.1. Ld. Counsel for the assessee submitted that the only issue raised in the show cause notice is that the ld. Assessing Officer (in short ld. “AO”) has not examined the transaction of Rs.5,00,000/- received by the assessee from M/s. Igloo Vanijya Pvt. Ltd. against the sale of investment in shares of M/s. Calcutta Gear Pvt. Ltd. Ld. Counsel for the assessee challenged the validity of issuance of show cause notice u/s 263 of the Act firstly on the ground that show cause notice was not accompanied with the material on which information of the authority is based and secondly no such document/annexure was attached with the show cause notice which could show that in what manner ld. Pr. CIT arrived at the conclusion that the assessment order u/s 147 of the Act was erroneous and prejudicial to the interest of the Revenue. These arguments were supported by the decision, in favour of the assessee, by the decision of Hon’ble Allahabad High Court in the case of Vijay Kumar Sharma vs. Appropriate Authority (1996) 220 ITR 509 (All.), the decision of the coordinate Bench of Delhi Tribunal in the case of Cargill India Pvt. Ltd. vs. DCIT (2008) 300 ITR (AT) 223. Further, referring to the judgment of the Hon’ble Supreme Court in the case of NDTV vs. DCIT (Civil Appeal No. 1008 of 2020 order dated 03.04.2020) the ld. Counsel for the assessee submitted that the principles and ratio laid down by the Hon’ble Apex Court in the above case with respect to the provisions of Section 147 of the Act are also analogous to the principle of natural justice 7 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. under the provisions of Section 263 of the Act and hence the ratio decidendi is clearly applicable to the instant case of the assessee. To reiterate briefly, the show cause notice u/s 263 was issued to re-open the assessment made by the AO and it was only after the assessee filed its reply to the said show cause notice that in the order of rejection reference was made for the first time to statement of entry operators and M/s. Vrishi Fashion which was alleged to be instrumental in facilitating the deposit of unaccounted cash into the bank A/c of the assessee company. Therefore the show cause notice u/s 263 of the Act and further reasons given thereafter in the final order did not conform to the principle of natural justice and the assessee did not get a proper and adequate opportunity to reply to the allegations which are now being relied upon by the ld. Pr. CIT in his order under appeal. Therefore, in view of the series of judicial pronouncements cited above in this connection, the order of the ld. Pr. CIT u/s 263 of the Act needs to be set aside on the above counts at the threshold and not to remit the matter for fresh consideration. 6. On merits of the case, it was submitted that ld. AO has carried out a detailed enquiry and other evidences as deemed fit and satisfied himself regarding the genuine receipt of Rs.5,00,000/- through banking channel on sale of shares of the company. Adequate enquiry was made and reliance was placed on the following decisions: i) CIT vs. J.L. Morrison (India) Ltd. (2004) 366 ITR 593 (Cal). ii) CIT vs. R.K. Construction (2009) 313 ITR 65 (Guj). iii) CIT vs. Anil Kumar Sharma (2010) 194 Taxman 504 (Del). iv) CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC). v) CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom). vi) CIT vs. Deepak Mittal, 324 ITR 311 (P&H). vii) Smt. Juthika Kar vs. ITO [ITA No.1128/Kol/2009, order dated 16.05.2012]. 8 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. 7. It was also submitted that no independent enquiry has been made by ld. Pr. CIT on his own and has solely acted on the information received by the Investigation Wing about some accommodation entries and did not put any effort to enquire before linking the appellant with such alleged dubious activities of the entry operators. 8. On the other hand, the ld. D/R vehemently argued supporting the detailed finding of the ld. Pr. CIT. 9. We have heard rival contentions and perused the records placed before us. Through this appeal, the assessee has challenged the assumption of jurisdiction u/s 263 of the Act by the ld. Pr. CIT. From perusal of the show cause notice u/s 263 of the Act we find that the only issue referred is that an amount of Rs.5,00,000/- received from M/s. Igloo Vanijya Pvt. Ltd. against sale of investment in shares of M/s. Calcutta Gear Pvt. Ltd. by the assessee was not examined at all by the AO. 10. With the assistance of ld. representative, we have gone through the record. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1 st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief 9 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1 st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 10.1. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity 10 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4 th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. 10.2. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; 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 requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the 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 Commissioner 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. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)”.[Emphasis Supplied] 10.3. Hon’ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: “ 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "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 the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are 11 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. 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 interest of the Revenue, unless the view taken by the ITO is unsustainable in law.” 10.4. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). 10.5. This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:- "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 10.6. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: 12 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. "63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: “We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee.” 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with 13 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. law. We, therefore, quash the same and grounds raised by the assessee are allowed." 10.7. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under Section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under Sec. 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such 14 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under Sec. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 10.8. Hon’ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) held as under: “19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent’s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 11. On examining the facts in light of the above legal jurisprudence we find that the assessee company declared income of Rs.20,097/- in the e- return filed on 23.09.2010 u/s 143(1) of the Act and notice u/s 148 of the 15 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. Act dated 29.03.2017 on the basis of information received from DIT (Investigation), Kolkata regarding suspicious transaction. In response, return of income was filed on 10.05.2017 declaring same income as disclosed u/s 139(1) of the Act. Following reasons were mentioned in the reasons recorded attached to the notice u/s 148 of the Act: “3.2. In response to the said reasons recorded and notices issued u/s. 143(2) and 142(1) of the Act, the A/R of the appellant-company appeared on several dates of hearing and submitted written objections/explanations with the required information/evidences as per the said notices which, inter alia, included the following: Queries made during assessment proceeding Replies of the assessee with evidences Letter No. ITO/Wd- 15(l)/Kol/Reasons/2017-18/ 227 dated 18.10.2017 (P/B pages 1& 2) As per information from DDIT(Inv.), there is cash deposit of Rs.5,00,000/- in the account of Vridhi Fashion bearing A/c. No.037205002263 of ICICI Bank which is used for unaccounted trading and providing accommodation entries. On examination of the assessee’s bank account, DDIT(Inv.) found frequent deposits of unaccounted cash and as per cash trail the same stood transferred to the accounts of different beneficiaries. Therefore, the high value cash deposit of Rs.5,00,000/- on different dates during F.Y. 2009-10 was not commensurate with the assessee’s return of income. Letter dated 13.11.2017 sent through Speed Post to the A.O. (P/B Page 3). That there is no transaction in our books with M/s. Vridhi Fashion. Request was also made to provide more details of transaction with date and amount of transaction to fulfil the queries. Vide notice u/s,142(l) dated 15.06.2017 and during the course of assessment proceeding, the Ld. A.O. called for various documents and information. [As listed in the next column and hence not repeated here]. (1) In response to 142(1) notice, the assessee vide letter dated 14.12.2017 (P/B pages 06-49) submitted the following details/ documents: a) ITR Acknowledgement & ITR in full set for AY 2010-11. b) Computation of income for A. Y. 2010- 11. c) The nature of business of the company is to finance and make investment in shares. d) Bank Statement showing the 16 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. transaction. (2) Vide letter dated 18.12.2017 in response to 142(1) notice, the following documents/information were submitted (P/B pages 49-62): a) The company has no transaction with Vridhi Fashions. b) As per cash trail shown by the A.O., the company has received Rs.5,00,000/- from M/s. Igloo Vanijya Pvt. Ltd. on 13.11.2009. The said amount was received against sale of investment in shares of M/s. Calcutta Gear Pvt. Ltd. to the said company. c) Copy of share sale bill dated 12.11.2009. d) Copy of Ledger of M/s. Igloo Vanijya Pvt. Ltd. e) Incorporation Certificate of M/s. Igloo Vanijya Pvt. Ltd. f)) Bank Statement of M/s. Igloo Vanijya Pvt. Ltd. showing the transaction. 3.3. The aforesaid facts would further be evident from the assessment order u/s. 147/143(3) itself. The Ld. AO having taken note of every kind of details, evidences, audited books of account etc. submitted as above in response to notice u/s. 142(1) and also during the course of the assessment proceeding, after having examined/investigated each and every aspect as warranted for the impugned assessment proceeding and deemed fit and after being satisfied with the replies of the queries given by the A/R of the appellant on several dates of hearing vis-a- vis sale of shares, completed the assessment as per return with his following observation/finding vide assessment order u/s 143(3)/147 of the Act dated 29.12.2017 (P/B pages 91-95): “In response to the above notices, Shri Bijoy Kumar Authorized Representative of the Assessee Company, appeared time to tome to discuss the case. The A/R of the assessee company was asked to produce relevant documents as per notice u/s. 142(1). The A/R of the assessee submitted necessary particulars as per requisition. Books of accounts were also produced. The case was discussed and the A/R of the assessee was heard. On examination of information brought on record and during the course of hearing in connection with assessment proceedings u/s 147 of the I.T.Act, 1961 for the A.Y. 2010-11 the A/R furnished submission wherefrom it is known that the assessee company has sold shares during the year and sum received against sale of investment in shares of Rs. 5,00,000/- was included in sale ledger/bill as reported in the Profit & Loss Account. ” On the above analysis of the case, perusal of the documents called for and furnished and considering the explanation of the A/R of the assessee, the Ld. A.O. considered it prudent to accept the sale of shares as genuine and consequently the assessment was completed on the income returned by the appellant. 17 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. Therefore, the order passed by the A.O. is neither erroneous nor prejudicial to the interest of the revenue.” 12. We also notice that on 14.12.2017 various details were filed including the ITR, computation of income, bank statement showing the transactions placed at page 6 to 49 of the paper book. Again on 18.12.2017 reply was filed stating that no transactions were made with M/s. Vridhi Fashion. Copy of shares’ sale bill issued to M/s. Igloo Vanijya Pvt. Ltd., copy of incorporation certificate of M/s. Igloo Vanijya Pvt. Ltd., the ledger account, audited financial statement and bank statement of M/s. Igloo Vanijya Pvt. Ltd. showing the alleged transactions were filed and the copies of the same placed at page 50 to 63 of the paper book. In the assessment order u/s 143(3) r.w.s. 147 of the Act, ld. AO specifically mentioned the issue pertaining to alleged transaction of Rs.5,00,000/- from sale of shares and after making a detailed enquiry and considering the documents received from the assessee from time to time, came to a conclusion that the alleged transaction is a genuine transaction of sale of shares as against the sale of investment assessee received consideration of Rs.5,00,000/- and the same is supported by sufficient material evidences. 13. We, therefore, find that this is a clear case of complete and adequate enquiry conducted by the AO on the very same issue mentioned in the show cause notice issued u/s 263 of the Act and, further, ld. AO was satisfied with these documents and those documents have been perused by us also, placed in paper book and find sufficient force in the contention of the ld. Counsel for the assessee that since there is a complete enquiry. Thus, ld. Pr. CIT erred in assuming jurisdiction u/s 263 of the Act as the AO has taken one of the permissible view provided under the law. This is a clear case of sale of investment by the assessee and, further, even if ld. Pr. CIT was not satisfied with the detailed enquiry conducted by the AO, he should have done independent enquiry on its own so as to find an error in the enquiry conducted by the ld. AO in view of the ratio laid down by Hon’ble Delhi High Court in the case of DG Housing Projects Ltd. (supra). No such finding is there in the impugned order and ld. Pr. CIT has only referred to the report of 18 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. the Investigation Wing which was already put before the ld. AO and there is no other new material which could support the view of the ld. Pr. CIT holding the assessment order as erroneous and prejudicial to the interest of the Revenue. 14. We, therefore, under the given facts and circumstances of the case, are of the considered view that firstly the issue raised in the show cause notice has been examined by ld. AO, being part of the reasons recorded for re-opening the case of the assessee and ld. AO after going various rounds and calling for various evidences and documents took the plausible view and accepted the transaction of Rs.5,00,000/- received from sale of investment in equity shares as genuine. Secondly, ld. Pr. CIT erred in observing that ld. AO has not examined at all the issue of receipt of Rs.5,00,000/-, thirdly, ld. Pr. CIT failed to appreciate that the assessee company is a non-banking financial company and the accounts are audited under the Companies Act and ld. AO took a permissible view in the matter after thoroughly examining the related documents. Fourthly, the present case is not a case of no enquiry but it is a case where complete and adequate enquiry has been conducted by the ld. AO. We, therefore, quash the impugned order passed u/s 263 of the Act and allow all grounds of the appeal raised by the assessee and restore the assessment order passed u/s 143(3) r.w.s. 147 of the Act dated 29.12.2017. 15. In the result, the appeal filed by the assessee is allowed. Kolkata, the 31 st March, 2022. Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 31.03.2022 Bidhan (P.S.) 19 I.T.A. No.: 406/Kol/2020 Assessment Year: 2010-11 M/s. Facit Sales Private Limited. Copy of the order forwarded to: 1. M/s. Facit Sales Private Limited, 9, Mango Lane, Guru Nanak, Kolkata- 700 001. 2. Pr. Commissioner of Income Tax-5, Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata