Iapl/78/2024 Of The Pr Commissioner Of Income Tax, Aaykar Bhawab, Noida And Another v. M/S Sampark Management Consultancy Llp

Chief Justice's Court Case :- INCOME TAX APPEAL No. - 78 of 2024 Appellant :- The Pr Commissioner of Income Tax, Aaykar Bhawab, Noida and anotherRespondent :- M/S Sampark Management Consultancy LLPCounsel for Appellant :- Gaurav MahajanCounsel for Respondent :- Ashish Bansal,Shalini Goel Hon'ble Arun Bhansali,Chief JusticeHon'ble Vikas Budhwar,J. 1. This appeal under Section 260A of the Income Tax Act, 1961(for short 'Act') is directed against order dated 22.03.2024 passedby the Income Tax Appellate Tribunal, Delhi Bench "G": NewDelhi (for short 'the Tribunal'), whereby the appeal filed by therespondent-assessee against order dated 27.03.2022 passed by thePrincipal Commissioner of Income Tax under Section 263 of theAct pertaining to Assessment Year ('AY') 2017-18 has beenallowed. 2. The respondent-assessee is engaged in the business of trading inshares and securities. It filed its return for AY 2017-18 on18.09.2017 declaring income of Rs.1,83,99,800/-. The case wasselected for scrutiny through Computer-assisted Scrutiny Selection(CASS) inter alia on the ground of excess claim of exemption ofdividend income and large increase in unsecured loans during theyear. During course of assessment proceedings, the AssessingOfficer ('AO') issued notice under Section 142(1) of the Act fromtime to time along with detailed questionnaire to examine andverify the issues requiring the assessee to clarify and justify them.The assessee complied with the same and filed necessary detailsalong with documentary evidence. 3. The AO examined the details and supporting documentary evidence and inter alia came to the conclusion that out of totalaccrued income of Rs.8,93,38,723/- from dividend from shares andmutual funds, Rs.8,89,01,128/- was received from mutual fundswhich is not within the purview of Section 115 BBDA and isexempted under Section 10 (35) of the Act and large increase inunsecured loans is attributable to increase in the amount of loansobtained by the firm from its partner and consequently, the AO didnot draw any adverse inference against the assessee on issuesmentioned in CASS and accepted the returned income and passedthe assessment order on 17.12.2019 under Section 143(3) of theAct. 4. The PCIT examined the case records of the assessee. To it theassessment order appeared to be erroneous and prejudicial to theinterest of revenue. Therefore, invoking powers under Section 263of the Act, it issued notice to the assessee to which a reply wasfiled. The PCIT considered the submissions and set aside theassessment order observing and directing the AO to conductspecific inquiry on the issues indicated and pass appropriateconsequential order as per the provisions of the Act after givingdue and adequate opportunity of hearing to the assessee. 5. Feeling aggrieved, the assessee approached the Tribunal. 6. The Tribunal after hearing the parties and going through therecord, came to the conclusion that the AO has neither assumedfacts incorrectly nor there is any incorrect application of law. Onthe contrary, he had applied his mind and his order was noterroneous and, therefore, there was no question of the order beingprejudicial to the interest of revenue and consequently allowed theappeal and quashed the order impugned as noticed hereinbefore. 5. Feeling aggrieved, the assessee approached the Tribunal. 6. The Tribunal after hearing the parties and going through therecord, came to the conclusion that the AO has neither assumedfacts incorrectly nor there is any incorrect application of law. Onthe contrary, he had applied his mind and his order was noterroneous and, therefore, there was no question of the order beingprejudicial to the interest of revenue and consequently allowed theappeal and quashed the order impugned as noticed hereinbefore. 7. Learned counsel for the appellant made vehement submissionsthat the Tribunal was not justified in setting aside the orderimpugned inasmuch as the PCIT has clearly observed that theassessment order was passed without making inquiries orverification which should have been made and the said situationwould be covered by Explanation 2 of Section 263 (1) of the Actand consequently, the order impugned passed by the Tribunal givesrise to substantial questions law. Submissions have been made thatprovisions of the Act have not been considered by the Tribunalinasmuch as it was established on record that the requisiteinquiries or verification pertaining to the claim made in relation todividend income were not made by the assessee. Furthersubmissions have been made that certain documents were filedbefore the PCIT, however, the same were not found available onthe assessment record which clearly showed that either the saiddocuments were not filed during assessment proceedings or nottaken into cognizance thereof or considered by the AO and,therefore, the order impugned passed by the Tribunal gives rise tosubstantial questions of law. 8. Learned counsel for the respondent supported the orderimpugned. Submissions have been made that the assessment hasbeen made under Section 143(3) of the Act after issuing detailedquestionnaire to the assessee and after examination andverification of the issues raised requiring respondent to clarify andjustify them, which was duly responded to along with thedocuments and based on which a categorical finding was recordedby the AO and, therefore, the exercise of jurisdiction under Section263 of the Act on the purported ground that the order was passedwithout making inquiries or verification, has rightly been set asideby the Tribunal and that the same does not give rise to any 9. We have considered the submissions made by counsel for theparties and have perused the material available on record. 10. The PCIT by its order under Section 263 of the Act, afternoticing few facts and case laws referred to the provisions ofExplanation 2 to Section 263(1) of the Act and observed that therequisite inquiries and verification which were required to be doneby the AO have not been undertaken and based on which he hasthe jurisdiction under Section 263 of the Act. 11. The Tribunal after thoroughly examining the record noticedthat the AO issued six notices under Section 142(1) of the Actdated 13.09.2019, 03.10.2019, 10.10.2019, 17.10.2019, 14.11.2019and 02.12.2019 along with questionnaire in each notice to whichassessee submitted reply dated 10.10.2019, 15.10.2019,25.10.2019, 08.11.2019, 21.11.2019 and 03.12.2019, running intoabout 300 pages. Whereafter, the AO discussed each reasonassigned for selection of the case for scrutiny separately andrecorded his findings based on the documentary evidenceproduced by the assessee before it. 12. The Tribunal was of the opinion that after undertaking anexhaustive exercise, the AO reached to the conclusion that noadverse inference against the assessee can be drawn with regard toany of the issues examined by him. The Tribunal whereafter itselfexamined the issues pertaining to the excess claim of exemption ofdividend income and that of unsecured loans and came to theconclusion that the entire material was produced before the AOand that it cannot be said that the assessee faulted in producing therecord during assessment proceedings and/or the same was not 12. The Tribunal was of the opinion that after undertaking anexhaustive exercise, the AO reached to the conclusion that noadverse inference against the assessee can be drawn with regard toany of the issues examined by him. The Tribunal whereafter itselfexamined the issues pertaining to the excess claim of exemption ofdividend income and that of unsecured loans and came to theconclusion that the entire material was produced before the AOand that it cannot be said that the assessee faulted in producing therecord during assessment proceedings and/or the same was not 13. Once the Tribunal on thorough scrutiny of the record has cometo the conclusion that the reasons recorded by the PCIT based onExplanation 2 to Section 263 pertaining to failure of the AO inmaking inquiries or verification was without any basis andcontrary to the record and has allowed the appeal on finding thatthe order passed by the PCIT was without jurisdiction, in relationto which learned counsel for the appellants failed to point out anyperversity, we do not find that the facts of the present case giverise to any substantial question of law as suggested by counsel forthe appellants. 14. For the above discussions, the appeal has no substance. Thesame is, therefore, dismissed. Order Date :- 27.11.2024RK (Vikas Budhwar, J) (Arun Bhansali, CJ)