Income Tax Appellate Tribunal – Kolkata
Smt. Archana Salarpuria, Kolkata vs A.C.I.T.,Circle-22, Kolkata on 28 August, 2019 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA
(Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Viswanethra Ravi, Judicial Member) I.T.A. No. 794/Kol/2019 Assessment Year: 2014-15 Smt. Archana Salarpuria…………………………………………………………………………………..Appellant Salarpuria Jajodia & Co. 3rd Floor 7, Chittaranjan Avenue Kolkata [PAN : ANBPS 7098 C] Vs. Assistant Commissioner of Income Tax, Circle-22, Kolkata…………………………………..Respondent Appearances by: Shri S. Jhajaria, FCA, appeared on behalf of the assessee. Dr. P.K. Srihari, CIT, Sr. D/R appearing on behalf of the Revenue. Date of concluding the hearing : July 29th, 2019 Date of pronouncing the order : August 28th , 2019 ORDER
Per J. Sudhakar Reddy, AM :-

This appeal filed by the assessee is directed against the order of the Learned Principal Commissioner of Income Tax, Kolkata – 8, (hereinafter the ‘ld. Pr. CIT’), dt. 28/03/2019, passed u/s 263 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2014-15.

2. The assessee is an individual and filed her return of income for the Assessment Year 2014-15 on 31/07/2014, declaring total income of Rs.3,70,13,650/-. Thereafter, she filed her revised return of income on 31/05/2015, declaring total income of Rs.4,83,88,250/-. The Assessing Officer completed the assessment u/s 143(3) of the Act on 06/12/2016 accepting the returned income. The ld. Pr. CIT issued showcause notice u/s 263 of the Act, dt. 22/02/2019, proposing to revise the order of assessment passed u/s 143(3) of the Act on 06/12/2016. The assessee gave a detailed reply vide letter dt. 08/03/2019. She has filed a number of enclosures along with this reply. The ld. Pr. CIT, passed an order u/s 263 of the Act on 28/03/2019, revising the assessment order passed u/s 143(3) of the Act on 06/12/2016, by holding that the said assessment order is erroneous, insofar as, it is prejudicial to the interest of the revenue. He set aside the assessment order only to the extent of the observations made in this order u/s 263 of
2 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria the Act and directed the Assessing Officer to pass a fresh assessment order by taking
into account the facts and legal position as discussed by the ld. Pr. CIT-8, Kolkata, in the
impugned order passed u/s 263 of the Act.

3. Aggrieved the assessee is in appeal before us.

4. The ld. Counsel for the assessee, Shri Siddhartha Jhajharia, submitted that the
order passed u/s 263 of the Act is bad in law for the reason that a) The ld. Pr. CIT held that this is a suspicious sale transaction and while doing so, he did not rely on any evidence whatsoever that made him come to such a conclusion. Thus, it is his case where the said conclusion is based on surmises and conjectures.
b) The ld. Pr. CIT held that the purchase bills and sale transactions required verification/investigation. He submitted that this cannot be a ground for exercise of jurisdiction by the ld. Pr. CIT u/s 263 of the Act, as no error prejudicial to the interest of the revenue in the order of assessment is pointed out.
c) The Assessing Officer in his notice u/s 143(1) of the Act, dt. 21/10/2016, at point no. 6, directed the assessee to furnish the details of sales transactions in shares and that the assessee in his reply dt. 16/11/2016, has at point no. 6, annexure B1, B2 & B3, (copies of which were placed in the paper book) had furnished all the necessary information to the Assessing Officer. He further pointed out that vide letter dt. 22/11/2016, the details of the capital gains were furnished to the Assessing Officer. Copies of the details were placed in the paper book. Thus, he submits that the Assessing Officer called for all the necessary records and after verifying the same had accepted the claim of the assessee. He submitted that the view taken by the Assessing Officer was a possible view and that it is not the case of the ld. Pr. CIT that the view taken by the Assessing Officer was wrong and untenable and hence under these circumstances, the exercise of jurisdiction u/s 263 of the Act was bad in law.
d) That the assessee has in its reply to the showcause notice issued u/s 263 of the Act, brought to the notice of the ld. Pr. CIT that, the assessee had made a declaration of the transactions of sale of shares to the Reserve Bank of India,
3 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria through Vijaya Bank and this declaration also consisted of a valuation certificate of shares given by a chartered accountant (copy of which was placed at page 208 of the paper book) and hence the transaction was genuine and at the fair value of shares.
e) He submits that it is wrong on the part of the ld. Pr. CIT to conclude that the transactions in question were suspicious and that the ld. Pr. CIT has no evidence whatsoever, that these stocks in question are penny stocks.
f) He submitted that the ld. Pr. CIT has not conducted any investigation or verification of the transactions by himself and has not pointed out as to what was the error committed by the Assessing Officer which caused prejudice to the interest of the revenue.
g) That the ld. Pr. CIT had made a factual mistake in holding that the assessee claimed capital loss on the purchase and sale of the said shares of M/s. Goodwill Griha Nirman Pvt. Ltd., despite the assessee verifying the same.

He relied on a number of case-law in support of his contentions, which we would be
referring to, as an when necessary.

5. The ld. CIT D/R, Dr. P.K. Srihari, on the other hand, supported the order of the ld.
Pr. CIT and submitted that a perusal of the assessment order demonstrates non
application of mind by the Assessing Officer. He argues that it is mandatory on the part
of the Assessing Officer to record reasons as to why a particular view has been taken on
the facts of this case. He submits that Explanation 2(a) to Section 263 of the Act, comes
into play. He relied on notice issued by the ld. Pr. CIT u/s 263 of the Act and the order
passed u/s 263 of the Act and case-law referred to in the order by the ld. Pr. CIT and
submitted that the order of the ld. Pr. CIT is required to be upheld.

6. We have heard rival contentions. On careful consideration of the facts and
circumstances of the case, perusal of the papers on record, orders of the authorities
below as well as case law cited, we hold as follows:-

7. The Assessing Officer during the course of scrutiny proceedings, in a notice given
u/s 142(1) of the Act on 21/10/2016, directed the assessee to furnish the details of the
4 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria sale transactions in shares. The assessee in his reply dt. 16/11/2016, at para 6, stated as
follows:-

“6. Details of Capital Gain earned on Sales of Shares, as recorded in accounts are enclosed at Annexure B1; details of Capital Gain offered to tax are enclosed at Annexure B2. Details of Profit on Sale of Shares are enclosed at Annexure B3.
(Point 6) 7.1. Later the assessee submitted the following details to the Assessing Officer vide
his letter dt. 22/11/2016:-

“1. Details of Capital Gains offered to tax have been filed with your goodself vide written submission dated 03.11.2016, point 6, Annexure B2. The assessee had earned Long Term Capital Gains on sale of land at Jaipur. Details of Long Term Capital Gain on sale Jaipur property, recorded in the books of the assessee, are enclosed at Annexure A. Copies of Conveyances deeds, with respect to sale of such lands, are enclosed therewith.

2. Details of Capital Gains offered to Lax have been filed with your goodself vide written submission dated 03.11.2016, point 6, Annexure B2. The assessee had earned Long Term Capital Gains on sale of shares of M/s. Goodwill Griha Nirman Pvt. Ltd. Copy of Sale Bill, with respect to sale of such shares, is enclosed at Annexure B.

3. Copy of bank statement of the assessee, highlighting receipts with respect to sale of land and sale of shares of M/s. Goodwill Griha Nirman Pvt. Ltd. is enclosed at Annexure C.

4. Reconciliation statement with respect to Income and TDS reflecting in Form 26AS vis-a vis same considered in Income Tax Return of the assessee, along with copy of Form 26AS is enclosed at Annexure D.

5. Details of Profit on Sale of Shares have been filed with your goodself vide written submission dated 03.11.2016, point 6, Annexure B3. Reconciliation statement with respect to sale of such shares reflecting in Individual Transaction Statement and books of the assessee is enclosed at Annexure E.”
7.1.1. Copies of all the documents in question which were submitted before the
Assessing Officer, have been filed before us from pages 166 to 188 of the paper book. A
perusal of the same demonstrates that the Assessing Officer has asked for and obtained
all the necessary details. Under these circumstances, the presumption is that the
Assessing Officer has examined the transactions in question. Non discussion or brief
discussion of the issue by the Assessing Officer in the assessment order, under these
facts and circumstances of the case, does not lead us to a conclusion that there is non
5 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria application of mind to the issue on hand, specifically when voluminous details were
obtained by the Assessing Officer after raising specific queries on the issue.

7.1.2. The Hon’ble Jurisdictional High Court in the case of Principal Commissioner of
Income-tax-5, Kol. v. Ivory Consultants (P.) Ltd. [2018] 96 taxmann.com 539 (Calcutta)
held as follows:-

“Section 43(5), read with sections 73 and 263, of the Income-tax Act, 1961 – Speculative transactions (Derivatives) – Assessment year 2011-12 – In course of assessment, Assessing Officer made sufficient inquiries on derivative loss claimed as a business loss by assessee – After said inquiries Assessing Officer completed assessment holding that loss from derivative’s was a genuine loss and had to be allowed as a normal business loss – However, Commissioner (Appeals) passed an order under section 263 setting aside assessment order on ground that no proper inquiry was made – Tribunal, however, found on facts that inquiry was conducted in a proper manner and thus, Tribunal confirmed order passed by Assessing Officer – Whether on facts, impugned order passed by Tribunal was to be confirmed – Held, yes”
7.1.3. The Hon’ble Jurisdictional High Court in the case of CIT vs. J.L. Morrison [2014]
366 ITR 593 (Calcutta), held as follows:-

“As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to
6 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished.
(Paras 90-92, 102)”
7.1.4. The Hon’ble Bombay High Court in the case of CIT vs. Fine Jewellery (India) Ltd.
[2015] 372 ITR 303 (Bombay), has held as follows:-

“8. We find that the impugned order of the Tribunal does record the fact that specific queries were made during the Assessment proceedings with regard to details of expenditure claimed under the head “miscellaneous expenses” aggregating to Rs. 2.94 crores. The respondent-assessee had responded to the same and on consideration of response of the respondent-assessee, the Assessing Officer held that of an amount of Rs. 17.98 lakhs incurred on account of repairs and maintenance out of Rs. 2.94 cores is capital expenditure. This itself would be indication of application of mind by the Assessing Officer while passing the impugned order. The fact that the assessment order itself does not contain any discussion with regard to the balance amount of expenditure of Rs. 1.76 crores i.e. Rs. 2.94 crores less Rs. 17.98 lakhs claimed as revenue expenditure would not by itself indicate non application of mind to this issue by the Assessing Officer in view of specific queries made during the assessment proceedings and the Respondent- assessee’s response to it. In fact this Court in the case of “Idea Cellular Ltd. v. Dy. CIT [2008] 301 ITR 407″ has held that if a query is raised during assessment proceedings and responded to by the Assessee, the mere fact that it is not dealt with in the Assessment Order would not lead to a conclusion that no mind had been applied to it.”
7.1.5. The Assessing Officer while accepting the claim of the assessee, in our view has
taken a possible view. The ld. Pr. CIT in his order, has not demonstrated as to how the
view taken is erroneous to the extent that it is prejudicial to the interest of the revenue.
The Hon’ble Supreme Court in the case of CIT vs. Kwality Steel Suppliers Complex
reported in [2017] 395 ITR 1 (SC), held as follows:-

“A power given to the Commissioner to revise the order of the Assessing Officer is held to be constitutionally valid having regard to the fact that the department has no right of appeal to the Commissioner (Appeals) against any order passed by the Assessing Officer. It is for this reason, section 263 is enacted to empower the Commissioner with the authority
7 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria of revising the order of Assessing Officer, where the order is erroneous and the error has resulted in prejudice to the interests of the revenue. As is clear from the language of section 263, there has to be a proper application of mind by the Commissioner to come to a firm conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Thus, two conditions need to be satisfied for invoking such a power by the Commissioner, which are:
i) the order sought to be revised by the Assessing Officer is erroneous; and
ii) it is prejudicial to the interest of the revenue [Para 7] It is clear from the above that where two view are possible and the Assessing Officer has taken one view and the Commissioner again revised the said order on the ground that he does not agree with the view taken by the Assessing Officer, in such circumstances the assessment order cannot be treated as an order erroneous or prejudicial to the interest of the revenue. Reason is simple. While exercising the revisionary jurisdiction, the Commissioner is not sitting in appeal. [Para 9]”
7.1.6. Applying the propositions of the law laid down in the above case-law to the facts
of this case, we have to necessarily hold that the exercise u/s 263 of the Act, by the ld.
Pr. CIT, is bad in law as there is application of mind by the Assessing Officer during the
assessment proceedings and as the Assessing Officer has taken a possible view on
examination of the issue on hand. It cannot be said that the view of the Assessing Officer
is not tenable.

7.2. Further, we find that the ld. Pr. CIT in show cause notice dt. 22/02/2019 at para
2 & 3 observed as follows:-

“2. On verification, it is observed that Short term & Long term Capital Gains on sale of shares were made by you during the period 01.04.2013 to 31.03.2014 and also you had purchased 3500 shares of Goodwill Gridha Pvt. Ltd. on 02.04.2004 for an amount of 35000/- and the same was sold at Rs.2,51,12,500/- on 02.05.2013. However, from your bank statement the amount has been shown to be credited as RTGS by Alayama Mathew. While no purchase bill of the share is available on record, the sale bill being also an internal voucher and keeping in mind the quantum of gain vis-a-vis discrepancies pointed above, it was required thorough verification/investigation. Moreover, this being a case of suspicious sale transactions in share. Further, from the details of shares transaction, it is seen that you had purchased and sold the shares with the same price and also set off loss arising out of the purported sales with the Capital Gains made during the year which required verification/investigation keeping in mind the fact that being a case of suspicious sale transactions in shares. Hence, the assessment completed u/s.143{3} on 06.12.2016 is erroneous in so far as it is prejudicial to the interest of the Revenue.
8 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria 3. I, therefore, propose to assume jurisdiction u/s 263 in this case and pass such order, as deemed fit and proper, to safeguard the interest of revenue.” (emphasis ours) 7.3. Thereafter in his order passed u/s 263 on 28/03/2019 at page 10 para 5,
concluded as follows:-
9 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria 7.4. On going through the above, we find that the assumption of jurisdiction by the ld.
Pr. CIT u/s 263 of the Act in the case on hand was on an allegation that the purchase and
sale transactions are suspicious. No evidence is brought on record by the ld. Pr. CIT to
come to such a conclusion.
8. The assessee had clarified before the Assessing Officer as well as the ld. Pr. CIT
that the shares in question of M/s. Goodwill Griha Nirman Pvt. Ltd., were originally held
by Late Shri Rakesh Salarpuria, who passed away on 07/04/2012 and that the
impugned shares were transmitted to the assessee through “will” which was probated
and hence, the question of producing purchase bills does not arise and that the cost of
acquisition to Late Shri Rakesh Salarpuria, was the cost of acquisition to the assessee. It
was further submitted that this transfer of shares were at a price as valued by a
chartered accountant and under those circumstances, the allegation that this is a
suspicious sale transaction is baseless. It was further submitted that the value of the
shares was based on the intrinsic value of assets held by the company and hence the
sale value was justified. This explanation supported by evidence proves the case of the
assessee.
These replies, in our view, were not properly considered by the ld. Pr. CIT. The
allegations that the sale of shares transactions was suspicion is not supported by facts.
No revision can take place based on mere suspicion. The ld. Pr. CIT has not controverted
the submissions and evidences filed by the assessee. When the assesee has furnished all
the details, including the purchase details and sale details, the ld. Pr. CIT has not
explained, as to how he came to a conclusion that there is an error that caused prejudice
to the interest of the revenue. There is no verification or enquiry by the ld. Pr. CIT of the
information furnished by the assesee to him. The ld. Pr. CIT has simply set aside the
matter to the file of the Assessing Officer for fresh adjudication, without himself
conducting any enquiry into the matter. The law requires the ld. Pr. CIT to himself
conduct an enquiry and then only come to a conclusion that the order in question is
erroneous and prejudicial to the interest of the revenue. If the ld. Pr. CIT had not applied
his mind to the replies, details and evidences filed by the assessee then the order
passed, without application of mind or verification is bad in law.
10 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria 9. The Hon’ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (supra) has
held as follows:-

“12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open. In Gabriel India Ltd.’s case (supra), law on this aspect was discussed in the following manner :

“. . . From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examina-tion of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is ‘erroneous insofar as it is prejudicial to the interests of the revenue’. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [See : Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10].

******
11 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed.

****** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be “erroneous” simply because in his order he did not make an elaborate discussion in that regard.”

9.1. The Hon’ble Delhi High Court in the case of DIT vs. Jyoti Foundation (supra) , it
has been held as follows:-

“The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of ITO v. D.G. Housing Projects Ltd. [2012] 343 ITR 329/20 taxmann.com 587/[2013] 212 Taxman 132 (Mag.), the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry.”
12 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria 9.2. The Hon’ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd.
[2012] 343 ITR 329 (Delhi) held as follows:-

“In the instant case, the findings recorded by the Tribunal are correct as the Commissioner 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 Commissioner is that ‘order passed by Assessing Officer may be erroneous’. The Commissioner had doubts about the valuation and sale consideration received but the Commissioner 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 assessee computation figures but he had reservations. The Commissioner 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 Commissioner 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 revenue. In latter cases, the Commissioner 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, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. [Para 19]”

9.3. Applying the propositions of law laid down in these case-law, to the fact of this
case, we have to necessarily hold that the exercise of power by the ld. Pr. CIT u/s 263 of
the Act, was bad in law.
10. We also find that in her reply, the assessee has stated before the ld. Pr. CIT that
the assessee has earned capital gain on the sale of shares of M/s. Goodwill Griha Nirmal
Pvt. Ltd., and that she has not incurred any loss as alleged in the said notice. The details
were furnished. Despite these explanation and evidences filed, the ld. Pr. CIT had
committed a factual error in concluding at page 10 para 5 of his order that the assessee
has claimed capital loss on account of share transactions of M/s. Goodwill Griha Nirman
Pvt. Ltd.. An order passed u/s 263 of the Act, based on a mistake of fact, cannot be
sustained. This is not a case of non enquiry or non application of mind. The allegation of
the ld. Pr. CIT is that the issue requires further verification and investigation.
13 I.T.A. No. 794/Kol/2019; Assessment Year: 2014-15 Smt. Archana Salarpuria 11. In view of the above discussion, we quash the order passed u/s 263 of the Act
and allow the appeal of the assessee.
12. In the result, appeal of the assessee is allowed.
Kolkata, the 28th day of August, 2019.
Sd/- Sd/-
[S.S. Viswanethra Ravi] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 28.08.2019
{SC SPS} Copy of the order forwarded to: 1. Smt. Archana Salarpuria
Salarpuria Jajodia & Co.
3rd Floor
7, Chittaranjan Avenue
Kolkata 2. Assistant Commissioner of Income Tax, Circle-22, Kolkata 3. CIT(A)-
4. CIT- ,
5. CIT(DR), Kolkata Benches, Kolkata.
True copy By order Assistant Registrar ITAT, Kolkata Benches

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