Gunjan Bhageria, New Delhi V. ACIT, New Delhi

ITA 909/DEL/2022

AI Insights

The case involves Ms. Gunjan Bhageria, who appealed against the order of the PCIT, which revised the assessment made by the AO for the assessment year 2017-18. The PCIT's revision was based on the grounds that the AO had not adequately investigated the sources of substantial cash payments made towards credit card bills and the authenticity of long-term capital gains claimed as exempt under section 10(38) of the Income Tax Act. The Tribunal found that the AO had indeed failed to conduct a thorough inquiry and accepted the PCIT's revision, leading to an enhancement of the assessee's income by Rs. 43,80,697.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112586 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 03-05-2022
• Other Referred Cases: Pooja Gupta Vs PCIT-19 ITA No 4057/Del/2018, Udit Kalra vs ITO ITA 220/2019, Sanjay Kaul vs PCIT-8, Delhi(2020) 119 taxman.com470(Delhi), Puja Ajmani vs ITO ITA No 5714/Del/2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Revision of order; Penny stocks; Capital Gains
• Section: 68; 143(3); 142(1); 143(1); 143(2); 64; 22

Judgement Text

1 ITA No. 909/Del/2022 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B ”: NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 909 /DEL/2022 Assessment Year: 2017-18 Ms. Gunjan Bhageria B-375, New Friends Colony, New Delhi PAN : AACPB3751B Vs Pr. Commissioner of Income Tax (Central) Delhi-1 APPELLANT RESPONDENT Assessee represented by Sh. Arvind Kumar, Adv. Department represented by Sh. T. James Singson, CIT, DR Date of hearing 13.07.2023 Date of pronouncement 06.09.2023 O R D E R PER ANUBHAV SHARMA, JM: The assessee has come in appeal against the order dated 31.03.2022 passed u/s 263 of the Income Tax Act, 1961 passed by Ld. PCIT, (Central), Delhi-1 (hereinafter referred as “learned Revisional Authority” or in short “PrCIT”) for the assessment year 2017-18, arising out of assessment order dated 14.12.2019 passed by ACIT, Circle – 28(1), Delhi u/s 143(3) of the Act (hereinafter referred in short as “Ld. AO”). 2. The brief facts of the case are that assessee has filed return of income for the A.Y. 2017-18 declaring an income of Rs. 18,93,020/- which was selected for 2 ITA No. 909/Del/2022 complete scrutiny through CASS/CPC and the following assessment order u/s 143(3) dated 14.12.2019 was passed; “The assessee e-filed return of Income for the Assessment Year 2017-18 on 03.08.2017declaring an income of Rs 18,93,020/-. It was processed under section 143(1) of the Income-tax Act, 1961 (hereinafter, the Act’) electronically at returned income. The case was selected for complete Scrutiny through CASS/CPC as per guidelines/ procedure for selection of cases for complete scrutiny. 2. Accordingly, statutory notice under section 143(2) was issued from ITBA on which was duly served on the assessee by email as well as speed post within the statutory period. Assessee was also requested to submit/provide reply electronically using ‘E-proceeding’ facility. Thereafter various notices u/s 142(1) (as per order sheet) was issued asking the assessee to furnish justification with respect to reasons for which case has been selected for scrutiny. In response of the same assessee furnished his reply on various dates as per the order sheet submitting various documents. The same has been examined and placed on record. 3. After examination of the Return of Income, supporting details/documents and written submissions filed during the course of assessment proceedings the returned income of the assessee is accepted. Assessed at an income of Rs. 18,93,020/-. Notice of demand and ITNS is separately issued.” 2.1 Ld. PrCIT observed from the assessment records that the case was selected for scrutiny to examine the large cash payments made towards credit card bills. The assessee had a credit card with ICICI Bank having number 5241930902828009. There was evidence on Insight Portal (Departmental Portal developed to collect data from Reporting Entities who are required to furnish a Statement of Financial Transactions or a Statement of Reportable Account u/s 285BA of the IT Act) that the assessee had made cash payments of Rs 5,35,500/- to ICICI Bank for settling this credit card bill. In the proceedings u/s 143(3), the AO raised a query in this regard, but when Assessee did not reply, the AO did not 3 ITA No. 909/Del/2022 confront the assessee with the information on hand. The AO sought a confirmation from ICICI bank calling for account statement pertaining to the credit card. Pending any reply from the ICICI Bank the assessing officer failed to make any meaningful enquiry nor reach a logical conclusion on this issue. Instead, he accepted the returned income. After the completion of assessment, reply was received from ICICI Bank wherein they provided the account statement containing complete details of the cash payments. 2.2 That when the Ld. PrCIT who initiated the proceedings u/s 263 of the act undertook a review of the assessment record, it was found that there was specific evidence of cash payment. In fact, the information in the Insight Portal regarding cash payments was downloaded and kept in the assessment record. Ld. PrCIT concluded that despite having access to this information, the AO failed to get an explanation from the assessee on the issue and did not bring to tax this unaccounted income. The subsequent reply of the ICICI Bank only gave a finality to the whole issue. The PCIT concluded that the assessment order passed by the assessing officer accepting the returned income was erroneous and prejudicial to the interests of the Revenue to the extent that the source of cash payments made for the credit card bills remained unexplained. Recording all these facts, the PCIT Delhi-10 issued a notice under section 263 on 16th July, 2021. Subsequently an order under section 127 dated 29th October 2021 was passed transferring the jurisdiction over the assessee from DCIT, Circle - 28(1), New Delhi to Central Circle 4, Delhi. 2.3 During revision proceedings u/s 263, the assessment record of proceedings u/s 143(3) was examined. Ld. PrCIT also observed that the assessing officer has allowed the assessee’s claim for exemption under the head long term capital gains. In the return of income for the relevant assessment year a sum of Rs 38,26,953/- 4 ITA No. 909/Del/2022 has been claimed as long term capital gain exempt under the provisions of section 10(38). After calling for the Demat Account, Contract note for all the transactions undertaken during the year and the annual profit and loss statement received from the broker/DP, the assessing officer has allowed the assessee’s claim of exemption of long-term capital gains. 2.4 Ld. PrCIT observed that the perusal information indicates that, out of the total capital gains disclosed of Rs. 38.26 lakhs, a sum of Rs. 35.10 lakhs is in respect of the investment in M/s. Gateway Distributors Limited. The assessee has earned abnormal profits of 1700% in respect of the shares held in this company. M/s. Gateway Distributors Limited does not appear to be a listed company. As per the contract note and Demat account furnished by the assessee, the shares sold during the year was in respect of a company by the name M/s. Monotype India Limited. It was found that the company M/s. Monotype India Limited has ceased all its business activities since 1999 and even the factory premises of the company had been shut down since that year. As regards the company M/s. Gateway Distributors Limited, no information was placed on record about this company, its operations or its promoters. Therefore, the phenomenal return of 1700% disclosed by the Assessee on this investment raised doubts regarding its genuineness. 3. After considering the response of the assessee the Ld. PCIT examined the two issues; In regard to the first issue of credit card payments sources, Ld. PrCIT observed that the details of payments made in respect of this credit card were submitted by the Assessee in their submissions adated 18 th February, 2022 in the proceeding u/s 263. On an examination of these credit card payments, it was found that a total of Rs 5,35,500/- was paid through cash against the credit card dues. Further it was also noticed that a sum of Rs 3,34,750/- was paid through cheques issued by third parties. The assessee was asked to explain the source of the 5 ITA No. 909/Del/2022 cash used for making the credit card payments. The assessee was also asked to explain the reason for 3rd party payments against the credit card dues. 3.1 The assessee made her submissions vide letter dated 15 February,2022. It was submitted by the Assessee that she had some accumulated cash balance available with her out of cash withdrawals made by her from time to time, as also gifts received by her from family members and relatives, so sum of Rs 7,02,000/- was available to her in this manner and the same was utilized by her for making the cash payments. 3.2 The assessee’s contentions were considered by Ld. PrCIT and he concluded that the total cash withdrawal made by the assessee during the previous year was Rs 4,03,000/- only and not Rs 7,02,000/- as claimed by her. In fact, it was noted that during the demonetization period (which falls during this previous year), the assessee has deposited a sum of Rs 2,20,500/- in the same ICICI bank account on 18 th Nov 2016. The AO had asked for the source for this cash deposit also in the 143(3) proceedings and the assessee had explained the same from her cash on hand and cash withdrawals. It was noted that the Assessee is withdrawing a sum of Rs 25,000 per month for meeting her personal expenses. Besides these monthly drawings, there is one withdrawal of Rs 100,000/- on 5 th Nov 2016. There are no other withdrawals. These amounts aggregate to Rs 4,00,000 approximately. Having regard to the standard of living maintained by the assessee, the drawings of Rs 4,00,000/- was considered on the lower side. If the cash deposit made during the demonetization period is also taken into account, there is hardly any money left in the hands of the Assessee to meet her day-to-day expenses. Accordingly, this explanation of the assessee that the source for the cash utilized for payment of credit card bills is explained out of the cash drawings made month to month, was rejected. As no other explanation was provided by the assessee to explain the 6 ITA No. 909/Del/2022 source for the cash utilized to make the credit card payment, the same remained unexplained. 3.3 Besides the cash payments, the credit card statement showed a few payments made by cheque received from third parties. The details in this regard are as under: S. No. Party Name Date Amount 1. Sunil A Thakur 31.01.2017 50,000 2. -do- 28.02.2017 1,14,000 3. -do- 28.03.2017 65,500 4. Amarbath Lalbahadur Thakur 12.01.2017 55,250 5. -do- 31.01.2017 50,000 Total 3,34,750/- 3.4 The Assessee was asked to explain the circumstances under which these two persons issued cheques towards the credit card bills. The Assessee was also asked to submit the bank statement of these two persons and the income tax returns filed by them to establish the capacity of these third parties to make the bill payment on behalf of the assessee. The assessee furnished the bank account statement of the two persons in her submissions dated 24th February 2022. Both the persons appeared to be related, probably father and son, and have same address as per the bank statement. The bank accounts of both parties showed a credit for salary amount every month and withdrawals are made against the same. Further it was noted that both are persons of very meagre means. The average balance in the accounts have rarely gone beyond Rs 10,000/-. In fact, the cheque payments towards the credit card bills are financed out of a one-offcredit of Rs 3,50,000 in the account of Amarnath Lalbahadur Thakur. The assessee further submitted that 7 ITA No. 909/Del/2022 both these persons do not file any income tax return. No material was placed on record as to how the assessee repaid them nor is any loan on account of these two parties being reflected in the balance sheet submitted by the assessee. 3.5 Having regard to all these facts, Ld. PrCIT concluded that the cash payments and payments through two third party cheques, aggregating to Rs 8,70,250 (Rs 5,35,500 + Rs 3,34,750) represent the assessee’s undisclosed income as the Assessee was unable to submit any explanation for the source of cash and the third-party cheque payments made in her favour. 4. In regard to issue no. 2, arising out of LTCG; Ld. PrCIT concluded that the Assessee has earned a phenomenal return of 1700% on the shares held by her in the company Gateway Distributors Limited. There is no information in the public domain regarding the business activities of Gateway Distributors Limited and the Assessee was unable to give any reason why investment was made in this company. Gateway Distributors Limited was later amalgamated with Monotype India Limited, a listed company. However, Monotype India Limited also has not been carrying on any business activity right from the year 1999 and the net worth of the company was negative. Therefore, the high valuations of the shares held in Monotype India Limited are also not justified by the business fundamentals. The control and management over Monotype India Limited, vested with one Mr. Naresh Jain. He along with his family members also held a substantial part of the share capital of Monotype India Limited, directly or indirectly through other companies. In the course of a search and seizure operation Mr. Naresh Jain admitted to indulging in a systematic activity of rigging prices of the shares of Monotype India Limited with the intention of providing entry for bogus long term capital gain against commission receipts. 4.1 The assessee exited the shares in March 2017 at a price of 18 per share. 8 ITA No. 909/Del/2022 Looking at the business fundamentals of the company, under normal circumstances, there would have been no investor interested in acquiring the shares of Monotype India Limited from the Assessee at the price of 18 per share. 4.2 Even without relying on the doctrine of preponderance of probability, efforts were made to identify the ultimate buyer of these shares to see if any genuine buyer would have acquired these shares from the Assessee at such prices. Out of the sales executed by the Assessee on 17 th March 2017, three of the end buyers could be located on the basis of information from the Stock Exchange. On verification w.r.t. 2 parties, it was found that they were persons of very meagre means of income. They have not filed any return for this period and even otherwise they do not have the capacity to undertake the impugned transaction. Encash Commodities which had purchased 110,000 out of the 200,000 shares sold by the assessee was also examined and it was found that they were not filing any return of income from assessment year 2017-18 onwards. Their return for asst year 2016-17 discloses meagre income. As on date the company is under process of striking off. Clearly, these 3 parties have merely lent their names to the transaction of bogus long term capital gains. 5. Thus under these circumstances, relying the preponderance of probability principles in drawing the inferences, Ld. PrCIT concluded that the long-term capital gains earned by the Assessee at a phenomenal rate of 1700% on the shares of Monotype India Limited are not genuine. It was therefore concluded that the impugned transaction of sale of shares held in Monotype India Limited is a bogus transaction entered into in connivance with various other parties as if it is a genuine transaction undertaken in good faith in the Stock Exchange. The fact that the transaction was undertaken fully through cheque both at the time of purchase and sale and sale was executed through the stock exchange cannot undo the fact 9 ITA No. 909/Del/2022 that the whole transaction was part of a full-fledged operation to bring the unaccounted money into books without paying any tax. When all the transactions are arranged in the logical sequence and it is observed that the ultimate buyer of the shares is merely a name lender, no other conclusion but the one arrived above can be regarded as a correct conclusion. 6. Ld. PrCIT thus concluded that the order passed by assessing officer u/s 143(3) is both erroneous and prejudicial to the interest to the Revenue. Ld. PrCIT was of the view that the details obtained by the assessing officer in the course of 143(3) proceedings, made evident that the assessing officer ought to have undertaken a detailed enquiry on the genuineness of the LTCG before allowing exemption. In this connection, Ld. PrCIT observed that a number of instructions have been issued by the department and the particular Instruction no 53 dated 08.03.2016, F.No 287/30/2014-IT(Investigation-ll) Volume III dated 16.03.2016 and subsequent letter F.No 287/30/2015 dated 29.03.2016 wherein the assessing officer have been directed to consider the information disseminated by the department in respect of penny stock cases before allowing long term capital gain. The assessing officer failed to undertake the minimum enquiry that was warranted in this case merely on the basis of material available on the record before him. An order passed without making enquiries or verification which should have been made in this case is an order deemed to be erroneous in so far as it is prejudicial to the interest of revenue. In arriving at- this conclusion reliance was placed on judgments in Pooja Gupta Vs PCIT-19 ITA No 4057/Del/2018 dated 31.01.2019; Udit Kalra vs ITO ITA 220/2019 and CM NO 10774/2019 dated 08.03.2019; Sanjay Kaul vs PCIT-8, Delhi(2020) 119 taxman.com470(Delhi); Puja Ajmani vs ITO ITA No 5714/Del/2018 dt 25.04.2019.; 10 ITA No. 909/Del/2022 7. Accordingly substantiating the conclusion that AO has failed to make enquires and making his own supplemental and incidental enquires the Ld. PrCIT held that; “1. An amount of Rs. 5,35,500/- representing the cash utilized for discharge of credit card bills and the amount of Rs. 3,34,750/- being the cheques issued by 3 rd parties in favour of the assessee’s credit card bills are brought to tax as the assessee’s income from unexplained sources under section 68 read with section 115BBE of the Act. 2. Exemption claimed u/s 10(38) of the Act in respect of LTCG on sale of shares of Monotype India Ltd. amounting to Rs. 35,10,447/- is held as undisclosed income of the assessee and brought to taxunder section 68 read with section 115BBE of the Act. Both the amounts were not assessed by the AO in the assessment order in question. The assessment is, therefore, enhanced by Rs.43,80,697/- (Rs.5,35,500/- + Rs.3,34,750/- + Rs.35,10,447/-). Accordingly, the AO is directed to recompute total income and issue notice of demand.” 8. The assessee is now in appeal before us and has raised following grounds of appeal ; “1. That the order dated 31.03.2022 passed us 263 of the Income- tax Act, 1961 passed by the Ld. Pr Commissioner of Income-Tax. (Central), Delhi-1 is against law and facts on the file in as much as he was not justified to set aside the order dated 14.12.2019 passed u/s 143(3) of the Income-tax Act, 1961 for the A/Y 2017-18 by the Assistant Commissioner of Income-Tax, Circle -28(1), Delhi on the 11 ITA No. 909/Del/2022 ground that the same is allegedly erroneous and prejudicial to the interests of the Revenue in as much as the twin conditions as laid out in Section 263 of the Income-tax Act, 1961 were not fulfilled. 2. That the order dated 31.03.2022 passed u/s 263 of the Income-tax Act, 1961 passed by the Ld. Pr. Commissioner of Income-Tax, (Central), Delhi-1 is against law and facts on the file in as much as he was not justified to direct the Assessing Officer to enhance the income of- (a) Rs. 5,35,500/- representing the cash utilized for discharge of credit card bill and Rs. 3,34,750/- being the cheques issued by third parties in favour of the Appellant's credit card bills and brought to tax as the Appellant's income from Unexplained sources under section 68 read with section 115BBE of the Act on the ground that source of which was not explained by the Appellant and the Assessing Officer failed to bring to tax the cash payment thereby ignoring the submissions made by the Appellant in this regard. (b) An amount of Rs. 35.10,447/- representing sale proceeds of sale of shares of M/s Monotype India Ltd on account of Long-Term capital Gains of Rs 35,10,447/- exempt u/s 10(38) of the Income-tax Act, 1961 by treating the said amount, allegedly, undisclosed income of the Appellant and bringing it to tax under section 68 read with section 1158E of the Act on the ground that the said amount was not assessed by the Assessing Officer in the assessment order and he ought to have undertaken a detailed enquiry on the genuineness of the LTCG before allowing exemption.” 8.1 Additional ground has also been raised as follows. “That the Order dated 31.03.2022 passed u/s 263 of the Income Tax Act, 1961 by the Ld. Principal Commissioner of Income fax , (Central) -1 Delhi is against the law as under the above said Section of the Act, he could not have passed an Assessment Order itself, determining the total income of the Appellant, for the reason that under the provisions of the Income Tax Act, 1961, it is only the Assessing Officer who is authorized to pass an Assessment Order and not the Pr. CIT.” 9. Heard and perused the record. 12 ITA No. 909/Del/2022 10. Ld. AR submitted that in regard to credit cards payments notice was also issued which is made available at page no. 131 of the paper book and assessee had replied the same by reply dated 28.11.2019 available at page no. 132. Therefore, it was not a case of lack of inquiry or no inquiry into the issue. So merely because there can be different view, the powers u/s 263 cannot be exercised. 11. Now as the material on record is considered, what comes up is that when AO had issued notice u/s 142(1) available at page no. 1 to 4 on 27.08.2019, which was responded by the assessee by reply dated 03.09.2019 available at page no. 5 to 7, the assessee vide question no. 22 was specifically asked to disclose the details of any payments made in cash towards credit card payments during the relevant assessment year and it was responded by the assessee by submitting that “assessee does not have any credit card.” 12. It appears that thereafter notice dated 25.11.2019 was issued by the Ld. AO available at page no. 131 and in response the Assessee had furnished copy of all credit card’s statements. 12.1 In assessee’s paper book there is another reply dated 16.11.2019 which is said to be in response to notice u/s 142(1) dated 13.11.2019 in which at for query at serial no. 10, Assessee has submitted that as desired, details of payment made in respect of credit card during the relevant assessment year is enclosed herewith. It was submitted that all credit card payments are made only through banking channels. Copy of relevant bank statement was enclosed herewith. Then at serial no. 11 assessee has also submitted that assessee has not made any payment of credit card using cash during the relevant year. 12.2 Now the assessment order as reproduced above in para 2, does not make any discussion on the issue. Not a word is mentioned of the issues to be examined, queries raised, submissions of assessee and conclusion drawn thereby. Certainly 13 ITA No. 909/Del/2022 the assessment order need not be elaborative and need not give reasons for accepting every submission made on behalf of assessee but it should at least reflect application of a judicious mind. Apparently there were contradictory stands of assessee with regard to holding of the credit cards and payments made to it. Ld. AO has not reflected in order as to how he has drawn inferences on the basis of responses of assessee qua the queries raised. The Ld. Revisional authority was justified to assume that the issue was not examined in a judicious manner so as to ensure there is no prejudice to the interest and loss to the Revenue and in such circumstances, order has to be construed to be erroneous and prejudicial to the interest of Revenue. 12.3 In the case in hand it is very much apparent from the material on record that initially the assessee has even denied holding any credit card. Then assessee made a submission that no cash payment of the credit card payment has been made. However, Ld. PCIT has established that there were cash payments by the assessee herself and that there were also payments by strangers towards the credit cards of assessee. It is apparent that based upon the explanation given in the Revision proceedings, Ld. PCIT has concluded that Rs. 5,35,500/- were paid cash against the credit card dues. The Assessee had tried to explain before Ld. PCIT that this amount of cash was part of the cash withdrawals during the year but the same is contrary to the assertion before Ld. AO that no cash was even paid and which Ld. PCIT has demonstrated on the basis of the withdrawals from bank that this amount of Rs. 5,35,500/- could not have been part of the withdrawals. 12.4 Ld. PCIT has duly examined the fact that the two persons who admitted the cash payment on behalf of the assessee had no credibility on the basis of their financial status to have made payment otherwise then if it was sponsored by the assessee. The bank statement of these two persons who were related as father and 14 ITA No. 909/Del/2022 son showed that the average balance in the account rarely had gone beyond Rs. 10,000/-. There is no justification from the assessee as to why these two persons have made payments on behalf of the assessee. 13. Thus, as contended by Ld. AR that issue was examined thoroughly by Ld. AO has no substance. It is not a case of Ld. AO holding one of the views, here is a case where false and contradictory stand of the assessee was left out of examination. The findings of Ld. PCIT with regard to directions issued to ld. AO to tax the amount of Rs. 5,35,500/- representing the cash utilities for discharge of credit card bills and Rs. 3,34,750/- being cheques issued by third parties in favour of the assessee’s credit card bills, being one from unexplained sources chargeable to tax u/s 68 r.w.s.115BBE of the Act, requires no interference. 14. As with regard to disallowance of LTCG on shares in Monotype India Ltd. Ld. AR relying page no. 38 of the order of Ld. PrCIT submitted that Monotype India Ltd. was into active business and a turn over of Rs. 47.11 Cr. in 2017 and Rs. 18.29 crores in 2016. He submitted that it was a prudent investment decision. Assessee had filed profit and loss account from 2010 to 2017 and also submitted certain documents relating to amalgamation of M/s. Gateway Distributors Ltd. 14.1 In regard to this issue it comes up that during scrutiny assessment proceedings, by reply dated 03.09.2019, the assessee had in para no. 19 page no. 7 of paper book made the following submissions ; “19. As desired, Details of Exempt Income earned during the relevant assessment year are as follow : S. No. Particulars Exemption u/s Amount (Rs.) 1. Long Term Capital Gain on sale of Shares (STT Paid) Exemption u/s 10(38) 38,26,953 2. Dividend Received Exempt u/s 10(34) / 62,170 15 ITA No. 909/Del/2022 10(35) 3. Interest on PPF Deposit Exempt u/s 10(11) 66,199 Total 39,55,322/- 15. At page no. 64 of the paper book the details of capital gain loss was submitted which shows that assessee transacted in two lakhs share of Gateway Distributors Ltd. which are shown to be acquired on 03.11.2010. This has been reproduced by the ld. PrCIT in para 14 of it’s order. It comes up that Ld. PrCIT had examined the issue observing in para 15, that M/s. Monotype India Ltd. has ceased all its business activities and even the factory premises of the company had been shut down since that year. And also with regard to the M/s. Gateway Distributors Ltd. no information was placed on record about this company, its operations or its promoters. As from the capital gains details it was very evident that there was of a phenomenal return disclosed by the assessee. There was sufficient material on record with the ld. AO to examine the same. However, no analysis is not reflected in the assessment order. In these circumstances, Ld. PCIT was justified to examine the issue and consider if there was no inquiry. 15.1 The bench is of considered view that merely raising the queries during assessment in a general manner and getting replies of the same cannot give rise to presumption of application of due diligence and a judicious examination of issue by the ld. AO as not a word in regard to issue is reflected in the assessment order. 15.2 The phenomenal return disclosed by the assessee in the scrutiny proceedings very much required a thorough investigation of the issue as done by Ld. PCIT wherein all factors has been examined to show that in the case of other family members of the assessee, the respective AOs have initiated action to assess the 16 ITA No. 909/Del/2022 LTCG in similar penny stocks. Ld. Pr CIT has demonstrated that as to how the assessee and his family members were found to be transacting into shares of the penny stocks manipulated by one Sh. Naresh Jain who was established penny stock operator as per the reports of investigation division. Ld. PCIT had examined thoroughly various circumstances including making inquiries from the Bombay Stock Exchange about the counter party to the transactions undertaken by the assessee and has fairly established by narrating the transactions of one Mr. Bhartiya how he was engaged in short selling and all the transactions were not genuine. Ld. PCIT has duly examined the financials of M/s. Monotype India Ltd. to rebut the claim of assessee that the company was engaged in genuine business operations and it was a prudent investment. There was no evidence from assessee before Ld. PrCIT or here to establish even the investment of Rs. 2 lakhs in the year 2010. In fact there was preferential allotments in the Gateway Distributors Ltd which was unlisted company. 15.3 Since Ld. AR has specifically pointed out the fact of turn over of M/s. Monotype India Ltd., the ld. PCIT’s observations in para 34 need to be reproduced to show that this claim of assessee has no legs to stand. In para 34 Ld. PCIT observed as follows ; “34. The second contention of the assessee is that Monotype India Ltd. is engaged in manufacturing activity and has shown substantial turnover during the FY 2016-17 & 2017-18. However, on examination of the balance sheet of Monotype India ltd. from 2011 to 2017 indicates an entirely different picture. 17 ITA No. 909/Del/2022 • The Company monotype India Limited was incorporated on 30 th September, 1974. The company was converted into a public limited company in October 1976 and listed in the Bombay Stock Exchange and the Calcutta Stock Exchange thereafter. Further reference to the note to accounts indicates that the operations of manufacturing units of the company at Bangalore had been suspended from 1st August 1999 and subsequently closed and disposed off. Even the marketing and other offices of the company have been closed and have become non-operational. It is further stated that the management is exploring possibilities of other business activities. It is stated that pending identification of other business activities, the funds have been temporarily deployed in shares and securities. • As on 31 st March 2010, out of the total assets of Rs 4.43 crores, a sum of Rs 4.42 crores was on account of accumulated losses. Same was the position as on 31st March 2011. There are no fixed assets in the balance sheet of the company nor any investments. The entire share capital of Rs 4.14 crores and unsecured loan of Rs 28 lacs is represented by Accumulated losses on the asset side. The accumulated losses of the company are far in excess of its net worth. • The profit and loss account for the year ended 31st March 2010 as well as for the year ended 31st March 2011 shows that there are no operational activities in the company. Administrative and other overheads incurred for the purpose of maintaining the corporate structure of the company such as audit fees, legal and professional fees and listing charges are the only expenses claimed in the profit and loss account. • The company continues to have no operational activity for the year ended March 31 2012,March 31st 2013 and March 31 2014. The Profit and loss account only shows minimal administrative expenses to maintain the corporate structure of the company. There is no indication of any new business activity commenced even during this period. • In the B/S for 2017, after many years of no operational activity, M/S Monotype India Ltd has disclosed that it is engaged in the business of dealing in shares and securities. Thus, it is noted that the assessee has no operational activity right from 1999till 2015. In 2016 and 2017, Monotype India Ltd showing some turnover on 18 ITA No. 909/Del/2022 account of sale of product as well as other operating revenues, the nature of which not explained in financial statements. After 2019 even Monotype India Ltd has filed an application before Insolvency and Bankruptcy Board of India.” 16. Thus, the conclusion of no enquiry drawn by Ld. PrCIT requires no interference. The Assessing Officer had fallen in duty to show that the inquiry which was initiated by raising queries was taken to a reasonable end so as to draw a conclusive inference in favour of the assessee. The findings of Ld. PCIT of LTCG claim being one liable to brought under tax u/s 68 r.w.s 115BBE requires no interference. 17. Coming to the additional ground. Ld. AR had submitted at the outset in regard to additional ground that Section 263 does not give powers to the PrCIT to enhance the assessment and to pass an order of assessment itself. In this regard as pointed out by Ld. DR if the provisions of Section 263 of the Act are considered same provide that Ld. PCIT can pass an order enhancing or modifying the assessment or cancelling the assessment and directing of fresh assessment. In the case in hand although the queries were raised by ld. AO and which were responded by the assessee, the assessment order though does not show any reason for not making the addition but Ld. PrCIT has duly examined both the issues to establish, that additions should have been made. Thus, Ld. PCIT was in its right to modify the conclusion of ld. AO qua not making the additions in the assessment by making 19 ITA No. 909/Del/2022 the additions. The power of ‘modifying the assessment’ has in its ambit making or correcting any additions, left out or not made by the AO, though ought to be made in the assessment proceedings. The same may or may not be by way of enhancement. 18. Lastly, Ld. AR has relied the order of Co-ordinate Bench in the case of Mr. Jitendra Singh Chadha vs. PCIT ITA no. 2732/Del/2018 dated 31.12.2018 to submit that Ld. PrCIT could not have passed the assessment order himself as only Assessing Officer is authorized to pass the assessment order. However, in that case the Co-ordinate Bench had concluded that assessment order was passed after application of mind. While here is a case which exhibit complete absence of application of judicial mind to the queries raised by AO and submissions of assessee qua which Ld. PrCIT has modified the findings on the basis of his independent enquiry. Ld. AR has also relied the judgment of Hon’ble Supreme Court of India CIT, Shimla Versus Greenworld Corporation 2009 181 Taxman 111 (SC) for the contention that when Ld. AO has taken into consideration the response of assessee, the powers u/s 263 cannot be resorted only because another view is possible. However, the Bench is of considered view that in the case in hand the aforesaid proposition is not applicable as the ld. AO having initiated inquiry failed to take the same to a reasonable and reflect in order as to show on what basis at all the issues were found to be concluded in favour of the assessee. It is not a 20 ITA No. 909/Del/2022 case of two views, as the assessment order does not reflect any view of the Assessing Officer. There can be a presumption of an official act to have been done in due course and to justify the view but the same is rebuttable by establishing the non application of mind, as done by Ld. Pr CIT. The grounds raised have no substance and the appeal of assessee is dismissed. Order pronounced in the open court on 6 th September, 2023. Sd/- Sd/- (N. K. BILLAIYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 08. 09.2023 *Binita, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI