IMPORTANT POINT
The court established that the PCIT has the authority to revise assessments under Section 263 when the assessing officer fails to conduct a proper inquiry into claims that may be erroneous and prejudicial to revenue.

JUDGMENT :

1. This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated 22nd August, 2023 passed by the Income Tax Appellant Tribunal, “C” Bench, Kolkata (Tribunal) in ITA No. 235/Kol/2019 for the assessment year 2014-15.

2. The revenue has raised the following substantial questions of law for consideration:

(i) Whether the Learned Tribunal has committed substantial error in law in quashing the order under Section 263 of the Income Tax Act, 1961 when it is apparent from the records that the assessment order is erroneous and prejudicial to the interest of the Revenue in as much as the same had been passed by the assessing officer without making due and proper enquiry and without verification of the aspect of bogus claim of exemption of Long Term Capital Gain by sale of shares of penny stock?

(ii) Whether on the facts and circumstances of the case and in law the Learned Tribunal was justified to ignore the fact that the Assessing Officer did not conduct proper enquiry in light of the report of the Investigation Wing of Department with regard to modus operandi followed by share brokers and assessee to enter into sham transaction to generate LTCG and hence revision of the order under Section 263 of the Income Tax Act, 1961 was justified?

(iii) Whether on the facts and circumstances of the case and in law, the Learned Tribunal was justified to quash the order under Section 263 of the Income Tax Act, 1961 by overlooking the fact that the entire transactions were stage-managed with the object to facilitate the assessee to plough back her unaccounted income in the form of fictitious Long Term Capital Gains of Rs. 5,52,865/- and claim bogus exemption?

(iv) Whether on the facts and circumstances of the case and in law, the order of the Learned Tribunal suffers from perversity as the Learned Tribunal ignored the facts brought on record in revision order under Section 263 of the Income Tax Act, 1961 establishing manipulation of share price of M/s. Kailash Auto Finance Ltd. as part of colourable device to generate fictitious LTCG with the aim to evade taxes?

(v) Whether the Learned Tribunal has substantially erred in not considering the binding ratio and principles laid down in the decisions of the Hon’ble Jurisdictional High Court in the case of Pr. CIT Vs. Swati Bajaj, (2022) 139 taxmann.com 352 (Cal), Pr. CIT Vs. Hill Queen Investment (P) Ltd. (2023) 152 taxmann.com 335 (Cal) and Pr. CIT Vs. Smt. Usha Modi, (2023) 152 taxmann.com 119 (Cal)?

3. We have heard Mr. Vipul Kundalia, learned standing counsel appearing for the appellant and Mr. S.M. Surana, learned senior counsel for the respondent.

4. The learned Tribunal by the impugned order allowed the assessee’s appeal and set aside the order passed by the Principal Commissioner of Income Tax-10, Kolkata (PCIT), dated 12th December, 2018 passed under Section 263 of the Act for the assessment year 2014-15. The only ground on which the learned Tribunal has set aside the order passed under Section 263 is that the PCIT had invoked his jurisdiction solely based upon a proposal received from the Assessing Officer.

5. The learned Tribunal had placed reliance on the decision of this Court in the case of Principal Commissioner of Income Tax Vs. Sinhotia Metals and Minerals Pvt. Ltd. (2023) 455 ITR 736 and few other decisions on the said point.

6. Before we examine the applicability of those decisions to the facts of the case, the following has to be taken note of. The assessment was completed under Section 143(3) of the Act by order dated 27.7.2016 accepting the return filed by the assessee and on the ground that the transaction regarding sale of shares has been confirmed by the details filed by the assessee and all transactions made through banking channel, no discrepancy has been found. As similar orders which travelled upto the learned Tribunal was the subject-matter of consideration before this Court in a batch of cases in Principal Commi