PCIT cannot revise a reassessment order under Section 263 if the AO conducted an inquiry

ORDER

Paresh M. Joshi, Judicial Member. – This is an appeal filed by the Assesssee under section 253 of the Income Tax Act, 1961 (hereinafter referred to as the Act). The Assessee is aggrieved by the order bearing number ITBA/REV/F/REV5/2023-24/1063260786(1) dated 23/03/2024 passed by the Ld. PCIT under section 263 of the Act which is hereinafter referred to as the “impugned order”. The relevant A.Y. is 2015-16 and the corresponding previous year period is from 01/04/2014 to 31/03/2015.

2.1 That as per the information available with the Income Tax Department it was noticed and found that the assessee had claimed bogus long term capital gain during the F.Y 2014-15 relevant to the A.Y. 2015-16.

2.2 By taking note of the aforesaid, the case of the assessee was reopened under section 147 of the Act after taking prior approval of higher authorities by Ld. AO.

2.3 Following notices had been e-served to the assessee requesting to furnish/submit requisite documents:

2.4 That In response to the notice u/s 148, assessee filed a return of income on 27/04/2021 declaring total income of Rs. 19,23,970/-. Subsequently a notice u/s 143(2) was issued to the assessee.In response to the notice u/s 142(1), the assessee furnished reply of the questionnaire, through e-compliance vide e-response dated 04/12/2021, 20/12/2021,11/02/2021,14/03/2022 and 21/03/2022 and submitted/furnished relevant documents, which were checked and verified. After considering the return of income, computation and other submissions/documents filed by the assessee, Assessment was completed on returned income i.e. Rs. 19,23,970/-.

2.5 That the aforesaid order in assessment bears number ITBA/AST/S/147/2021-22/1041316730(1) dt. 20/03/2022 which was passed under section 147 r.w.s 144B of the Act, wherein returned income of Rs. 19,23,970/- of the assessee was accepted.

2.6 That by impugned order the Ld. PCIT in exercise of power conferred upon him has set aside the aforesaid assessment order dt. 23/03/2022 by observing as under:

6. In view of the foregoing, it is held that the assessment for AY 2015-16 order dated 23.03.2022 is erroneous in so far as it is prejudicial to the interests of the revenue on the above two countsas per clauses (a) and (b) of Explanation 2 to Sec 263 of the Income-tax Act, 1961.

7. The assessment order is set aside with the directions to the assessing officer to pass a fresh assessment order after making the requisite inquiries and verifications and giving due opportunity of hearing to the assessee.

2.7 That the asssessee being aggrieved by the impugned order has filed present appeal challenging its legality, validity and proprietary on following grounds which are as under:

1. That the Ld. PCIT has erred in cancelling the earlier assessment as passed by the AO, Faceless vide order, dated 23.03.2022 and holding the same as erroneous and prejudicial to the interest of revenue.

2. That the PCIT has failed to appreciate the fact that the assessment was completed by the Ld. Assessing Officer, Faceless after due application of mind and after considering all the relevant material. Thus, the setting aside the assessment as framed by the AO is bad in law.

3. Notwithstanding the above said ground of appeal, it is submitted that the notice u/s 263 having been issued on the basis of audit objection and, therefore, the proceedings having been initiated on the basis audit objection, the same is bad in law as per the Judgment of Hon’ble Punjab & Haryana High Court in the case of Sohana Woollen Mill reported in [2008] 296 ITR 238 (Punjab & Haryana) and which have been followed by the Hon’ble Chandigarh Bench of the ITAT in the case of Sh. Surinder Pal Singh, reported in 94 ITR (Trib) 458 and other cases.

4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.

3. Record of Hearing

3.1 The hearing in the matter took place before this Tribunal on 06/01/2025 when Ld. AR for and on behalf of the Assessee appeared and Ld. DR for an on behalf of the Revenue appeared. Both the parties were heard patiently and at length on their respective submissions and arguments. Equal and fair opportunity was afforded to both the parties.

3.2 The Ld. AR has contended as follows:

1. The assessee is an individual and she is regularly filing her ITR and copy of return filed by her for the year under consideration are forming part of paper book at Pg 1-2 of the Paper Book.

2. The assessee had purchased shares of Indusind bank on 06.04.2009 and then sold such shares on 17.03.2015 i.e. in the year under consideration for 29,88,945 resulting in capital gain of Rs. 28,75,041/ which is exempt u/s 10(38) of the Act.

3. Further, the assessee had also purchased two immovable properties during the year under consideration amounting to Rs. 36,55,000/- and Rs. 2,24,17,500/-respectively.

4. The case of the assessee was reopened u/s 147 of the Act on the reasons to believe that the assessee has claimed bogus long term capital gain (LTCG) of Rs. 60,65,724/- on sale of shares of Indusind Bank which has escaped assessment for AY 2015-16. The copy of the reasons recorded for reopening of case u/s 147 of the Act is forming part of paper book at Pg 2A-2B of the Paper Book.

5. The assessee had received various notices during the assessment proceedings and various replies were filed by the assessee in response to the same wherein it was explained that firstly the reasons recorded for reopening of the case were incorrect as the amount of LTCG of Rs. 60,65,724/- as mentioned in the reasons is incorrect and secondly she had not claimed any bogus LTCG.

6. In fact it is a genuine transaction resulting in LTCG of Rs. 28,75,041 out of sale and purchase transaction of shares of Indusind Bank where sale has taken place through DEMAT account of the assessee and purchase was made in cash. The copy of notices received during assessment proceedings including replies filed by the assessee are forming part of the paper book at Pg 3-17 of the Paper Book.

7. After a perusal of the replies filed by the assessee and after due application of mind, the assessment order was passed by the Ld. AO on 23.03.2022 u/s 147 r.w.s. 144 B of the Act wherein the returned income of the assessee was accepted with the following remarks:

“In response to the notice u/s 148, assessee filed return of income on 27.04.2021 declaring total income of Rs. 19,23,970/-. Subsequently, notice u/s 143(2) issued to the assessee. In response to the notice u/s 142(1), the assessee furnished reply of the questionnaire, through e-compliance vide e-response dated 04.12.2021, 20,12,2021, 11.02.2021, 14.03.2022 and 21.03.2022 and submitted/furnished relevant documents, which were checked and verified. After considering the return of income, computation and other submissions/documents filed by the assessee. Assessment is competed on returned income i.e. Rs. 19,23,970/-“

8. Thereafter, the assessee received a Show Cause notice (SCN) dated 10.01.2024 and 26.02.2024 issued u/s 263 of the Act on the following issues:

* Bogus long term capital gain entries amounting to Rs. 60,65,724/-(30,24,000/- from Dayanand Singh and of Rs. 30,41,724/-from Lifeline Securities Ltd) during FY 2014-15.

* Immovable property purchased during the year but AO fails to verify the source of purchase consideration paid by the assessee amounting to Rs. 2,50,05,000/-.

The copy of the SCN’s is forming part of paper book at Pg18-20 & 28-29 of the Paper Book.

9. In response to these SCNs, replies dated 08.02.2024 (Pg 21-27 of Paper Book) and 01.03.2024 (Pg 30-34 of Paper Book) were filed wherein it was explained to the worthy PCIT that the assessee has not entered into any bogus transaction and a genuine transaction of sale of shares of Indusind bank has taken place during the year under consideration and following documents were filed to substantiate the claim of the assessee:

* Copy of contract note of purchase of shares of Indusind Bank in FY 2009-10 (Pg 35 of Paper Book)

* Copy of ITR of AY 2009-10 & 2010-11 depicting source of cash in hands of the assessee for purchase of shares of Indusind Bank (Pg 36-37 of Paper Book)

* Copy of notarized affidavit filed by Teena Garg with respect to purchase of shares of Indusind bank (Pg 38-39 of Paper Book)

* Copy of contract note of sale of shares of Indusind Bank in FY 2014-15 (Pg 40 of Paper Book)

* Copy of net obligation bill issued by broker M/s DSE Financial Services Ltd. depicting issue of sale consideration of Rs. 29,88,945/-(Pg 41-42 of Paper Book)

* Copy of Bank statements of the assessee in which the whole sale consideration of Rs 29,88,945/- is credited and no other amount is credited during the year regarding sale of share (Pg 60-61 of Paper Book) 10. Further, regarding the source of purchase of property, it is submitted that the whole payment is made through banking channels and out of own funds of the assessee as well loan taken from bank and following documents were filed by the assessee to prove the sources of the property purchased:

* Copy of purchase deed of immovable property amounting to Rs. 36,55,000/- purchased by the assessee (1/2 share) during the year under consideration is forming part of paper book at Pg 43-47 of Paper Book.

* Copy of purchase deed of immovable property amounting to Rs 2,24,17,500/- purchased by the assessee (1/4 share) during the year under consideration is forming part of paper book at Pg 48-49 of Paper Book.

* Copy of bank account of assessee as maintained with Punjab National Bank depicting payments made for the purchase of immovable property is forming part of paper book at Pg 60-61 of Paper Book.

* Copy of bank loan statement of the assessee in which loan amount is disbursed to the assessee is forming part of the paper book at page 62-65 of Paper Book

3.3 The Ld. AR after describing the above factual matrix interalia contended that the impugned order of Ld. PCIT u/s 263 of the Act is bad in law, illegal, not proper and deserves to be set aside.

3.4 It is contended by Ld. AR that the case of the assessee was reopened u/s 148 of the Act on the following issue:

“As per the information uploaded by the office of the DDIT(lnv), New Delhi through Insight portal during the FY2014-15 relevant to AY 2015-16. The assessee Smt. Teena Garg has claimed bogus long term capital gain of Rs. 60,65,7241-through reputed stock namely lifeline securities limited PAN AAACL3525A by issuing anti dated forged contract notes. During the FY 2014-15, relevant to AY 2015-16, the assessee has filed her income tax return declaring income of Rs. 19,23,970/-. Therefore I have reasons to believe that the amount of Rs 60,65,7241-is the income of assessee from unexplained sources which has escaped assessment for AY 2015-16. (Copy of reasons placed at Page 2A-2B of PB)”

3.5 That in view of aforesaid at the outset, the reasons, recorded for the reopening of the case were incorrect as the amount of LTCG (Rs. 60,65,7241/-) mentioned in the reasons was incorrect as against the actual capital gain of Rs. 28,75,041 (Sale proceeds of Rs. 29,88,945 LESS cost of acquisition of Rs. 1,13,904) and the genuineness of the said capital gain was proved by the assessee vide various documents listed in Para 3.2 (9)above. Therefore, after going through the detailed replies filed by the assessee and after due application of mind by the Ld. AO, the issue was accepted by the Ld. AO.

3.6 It was then contended by the Ld. AR that there was full and complete application of mind by the Ld. AO in order in assessment dt.. 20/03/2022 which has been presented to us by following tabular chart:

3.7 Basis above tabular chart it was interaila contended that the Ld. AO while passing the assessment order dated 20/03/2022 had duly applied mind on issue of “Indusind Bank shares” and accordingly the show cause notice and so also impugned order of Ld. PCIT under section 263 of the Act is bad in law as it cannot be said in law that the assessment order dt. 20/03/2022 is erroneous and prejudicial to interest of Revenue. All queries and information sought were provided for to the Ld. AO basis that there was due application of mind, the examination and verification therefore. Reliance was placed on several case law including the decision of ITAT in case of Exotic Realtors & Developers v. PCIT reported in CTR (2024) 38 NYPTTJ 993 (Chd) and emphasis was laid on following extract:

AO having issued successive notice under ss. 142(1) and 143(2) from time to time to the assessee raising numerous queries and framed the assessment after considering the replies submitted by the assessee, the assessment order passed by the AO cannot be said to be erroneous and prejudicial to the interest of the Revenue and therefore, the impugned order passed by the Principal CIT in exercise of his revisionary jurisdiction under s. 263 is bad in law, more so as he himself has not made any minimal enquiry before holding that the AO has not made any enquiry; inadequate inquiry or insufficient inquiry cannot be a ground to order revision of assessment under s. 263.

Reliance was also placed on judgment of Hon’ble Supreme Court of India in case of PCIT v. SPML Infra Ltd. reported in (2024) 164 taxamnn.com 505(SC) and emphasis was laid on following extract:

INCOME TAX: SLP dismissed against order of High Court that where Assessing Officer computed capital gain on sale of an asset by raising queries and after considering submissions of assessee, PCIT was not justified in assuming jurisdiction under section 263 by treating assessment order as erroneous.

Reliance was also placed on judgement of Hon’ble Delhi High Court Case in PCIT v. Clix Finance India (P) reported in  (Delhi) and emphasis was laid on following extract:-

” Where Assessing Officer during assessment proceeding issued a questionnaire to assessee regarding deduction on account of provision for non-performing assets and loss on interest rate swap and same was replied by assessee, it was not a case where no enquiry whatsoever had been conducted by Assessing Officer with respect to claims under consideration and, thus, revision order passed under section263 was not sustainable “

Reliance was also placed on judgement of ITAT Chandigarh in case of Pawan Kumar v. ITO reported in

INCOME TAX : Where Principal Commissioner passed revision order under section263 on ground that amount of cash deposit in account of assessee was unexplained cash deposit, however, same issue in assessee’s case had been specifically looked into by Assessing Officer and source of deposit was fully enquired into and explanation offered by assessee was considered and accepted, impugned order was to be quashed as revisionary powers could not be permitted to be exercised on suspicions and inferences.

3.8 It was next contended that further the PCIT has held the order passed by the Ld. AO as erroneous as well prejudicial by applying the explanation 2 to section 263 which is totally incorrect as the case of the assessee does not fall in any of the limb of explanation 2 to section 263. The AO has made sufficient enquiries on the issues concerned and there is no lack of enquiry by the AO. Therefore, even after the thorough application of mind by the AO, merely because it seems to the PCIT that issue had remain unattended by the AO, he cannot call for application of section 263 of the Act by treating the order passed by the AO as erroneous and prejudicial to the interest of the revenue. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer’s notice in the assessment proceedings cannot be said to be lacking bona fide, and as long as the path adopted by the Assessing Officer is taken bona fide and he has adopted a course permissible in law, he cannot be faulted which is a sine qua non for invoking the powers under section 263. Reliance in this regard is placed on the following judgments including the judgment of Apex Court, wherein it has been held as under:

PCIT v. SHREEJI PRINTS (P.) LTD.* as reported in [2021] 130 TAXAAANN.COM 294 (SC)

Section69, read with section263, of the Income-tax Act, 1961 -Unexplained investments (Unsecured loans) – Assessment year 201314 – Assessee-company had received unsecured loans from two different companies – Commissioner noting that said loans were shown as investment in assessee’s name in balance sheet of respective companies exercised his revisionary powers and passed an order without giving an opportunity to assessee of being heard, invoking Explanation! to section263 -High court by impugned order held that since Assessing Officer has made inquiries in details and accepted genuineness of loans received by assessee, such view of Assessing Officer was a plausible view and same cannot to be considered erroneous or prejudicial to interest of revenue – Whether SLP against said impugned order was to be dismissed – Held, yes [Para 2]

3.9 The Ld. AR has placed reliance on decision of the ITAT Chandigarh Bench in case of LOIL Continental Foods Ltd. v. PCIT in ITA No. 577/Chd/2017 (Chd-Trib) & in particular following extract.

The Id. CIT made reference to the Explanation-! to Section 263 and also decision of Hon’ble Supreme Court in the case of CIT v. Amitabhachan ITR 200 (SC). It H pertinent to note that Explanation-2 of section 263(1) would help the Id. Commissioner to take cognizance under section 263 of the Act, if no inquiry was conducted by the AO before finalizing the assessment order. No do\ibt the assessment orders are very brief, and did not have elaborate discussion on these issues, but it is pertinent to bear in mind that assessees have no control over the AO and cannot persuade him to draft the assessment order in a particular manner. It is the discretion of the AO, how to pass an assessment order. Had an elaborate discussion available, then that would be an ideal situation for the higher appellate authorities to appreciate, what has operated in the mind of the AO while passing the assessment. But in the absence of such discussion, it has to be ascertained from the questionnaire and the replies submitted by the assessee. Explanation-2 can be invoked when no inquiry was conducted by the AO. In the present case, he has issued a questionnaire calling for details on 37 counts. Those details were submitted. Some of the issues raked up by the Id. Commissioner in the impugned order were between the group concerns, and.their accounts were open before the AO in simultaneous proceedings. He was satisfied with these accounts. Thus, it is a case of inquiry and Explanation-2 cannot be invoked in the present case. In view of the above discussion, we are of the view that the Id. Commissioner is not justified in exercising powers under section 263, and setting aside the assessment orders. We allow all these appeals and quash the impugned orders passed under section 263 of the Income Tax Act in each case of the appellants.

3.10 The Ld. AR then contended that in the instant case the assessee had discharged his onus via filing of sufficient documentary which were not at all negated by the Revenue. The same were found to be acceptable upon examination and verification which fact is even recorded in the impugned assessment order dt. 23/03/2022 hence provisions of Section 263 ought not to have been invoked and the impugned order under section 263 of the Act ought not to have been passed.

3.11 The Ld. AR with regard to issue of purchase of immovable properties interalia contended that during the course of the assessment proceedings which culminated in the passing of impugned assessment order dt. 23/03/2022 the Ld. AO even asked the assesseee to file evidences of sale of immovable property’s of Rs. 36,55,000/-and Rs. 2,13,50,000/-. However it was clarified to the Ld. AO that she had not sold any property and in fact two properties have been purchased by the assessee from one “Amar Deepika” and “Gupreet Kaur” respectively. The Bank account statement of assessee with PNB was available with Ld. AO and source of the purchases of immovable properties were too were examined and verified by Ld. AO and that the same were found to be correct. During the proceedings before Ld. PCIT the documentary evidence in the shape of purchase deeds (page 43-47, 48-59 of PB) were duly filed by the asssesseealongwith saving bank statement of PNB (page 60-61 of paper book) and so also loan statement (page 62-65) which were all filed before Ld. AO to prove the sources of purchase of property. It was contended that investments were made out of declared sources of income, out of bank account and bank loan. Details of two immovable explained and its sources are described in synopsis filed before us which are as under:

” % share in property at village Buranwala, Tehsil Baddi, Distt Solan measuring 4 Bigha 2 Biswa (Registry at pg 43-47 of PB):

“1/4 share in H.No. 1065, Sector – 27B, Chandigarh vide registered sale deed dated 30.12.2014 as per details below (Registry at Pg 4859 of PB):-

As regards the source of investment, the assessee has made investment under debit to his SB A/c No. 3887000100031296 in PNB, Ambala Cantt as per details given below:

3.12 The Ld. AR then contended that the property situated at H.No. 1065, Sector-27B, Chandigarh was purchased by the assessee in joint ownership and case of one of the co-owner namely Sh. Parmod Kumar was selected for limited scrutiny on the issue of cash deposit and purchase of property. After filing detailed reply in his case explaining source of property partly out of loan funds and balance out of his independent sources, assessment was finalized by ITO-Ward-3, Ambala by passing assessment order dated 20.02.2017 u/s 143(3) of the Act wherein the case was assessed at returned income. Copy of assessment order dated 20/02/2017 was given across Bar of Shri Parmod Kumar(supra).

3.13. The Ld. AR then came to impugned order of Ld. PCIT and contended that the in so far as the information at Serial No.. 1044 wherein the name of the assessee appears in the list of the beneficiaries uploaded by Investigtion Wing wherein assessee is shown to have purchased shares through broker Lifeline Securities Ltd is concerned the assessee vide reply dated 20/12/2021 (page 16 & 17 of paper book) requested the Ld. AO to provide the material relied upon but no material was ever provided to the assessee nor request to cross the person concerned who had made such a request was entertained. The Ld. AR then contended that in the absence of any report from the Investigation Wing ofDepartment, the Ld. AO rightly accepted the contention of the assessee and accepted the ROI as filed upon making thorough examination and verification as fit and proper. It was contended that the assessee purchased shares from SEBI Registered entity “Life line Securities Limited” in good faith in cash. The assessee cannot be blamed for backend transactions of “Lifeline Securities Ltd.” who as a broker purchased the shares from exchange whether in the name of the assessee or not because in so far as assessee is concerned she had paid for the shares of Indusind Bank in good faith. If the shares were not purchased from the exchange in the name of the assessee then fault is only of Life Line Securities Ltd. and not of the assessee herein. The Ld. AO sought all desired information on transaction from assessee and that the same were provided for. The Ld. AO basis evidence concluded that the Transaction had taken place during the year under consideration and were genuine. The AO wrongly accepted the reply of the assesssee and her claim of LTCG in casual and cursory manner is not at all justifiable.Further in support of purchase transaction of shares in cash affidavit by assessee was given; which should be proof enough. It was contended that no report of Investigation Wing of Income Tax Department was supplied to assessee and therefore the impugned order holding that impugned order of assessment is without any inquiry is bad in law. Reliance was placed on judgement of ITAT Bangalore in case of Mahesh Reddy v. PCIT reported in  (Bangalore – Trib.) in which following extract was relied upon:-

“INCOME TAX: Pr. Commissioner, in his revisionary jurisdiction, cannot say order with some enquiry done by Assessing Officer to be erroneous; he can hold non inquiry cases to be erroneous and for this he himself has to bring on record error and prejudice through independent verification and enquiry”

3.14 The Ld. DR however contended before us that the impugned order is just and proper. There are no legal infirmities. The Ld. PCIT has rightly invoked the provision of Section 263 of the Act and in particular Clause (a) & (b) of Explanation 2 to Section 263. The Ld. DR has finally placed reliance on the impugned order of Ld. PCIT.

4.1 We now have to adjudge and adjudicate the legality, validity and the proprietary of impugned order of Ld. PCIT which was passed u/s 263 of the Act.

4.2 We at the outset and threshold reproduce below Section 263 (1) & Explanation 2 with which we are primarily concerned.

263. (1) The Principal Commissioner Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or 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 or the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests 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,-

(i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or

(ii) an order modifying the order under section 92CA; or

(iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.

Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,-

(a) the order is passed without making inquiries or verification which should have been made;

(b) the order is passed allowing any relief without inquiring into the claim;

(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

4.3 We notice basis provision of Section 263 of the Act that the power of revision are conferred upon superior officers of Department of Income Tax. In the instant case PCIT called for and examined the records of the assessment proceedings which had culminated into passing of the “impugned assessment order dt. 23/03/2022” in which the return of Income of Rs. 19,23,970/- filed by the assessee was accepted however before that the Ld. AO had issued a notice under section 148 dated 31/03/2021 which we notice is not placed on paper book and reply to it if any. Thereafter there is issuance of Notice under section 142(1) of the Act which is dated 14/12/2021 (PB page 3 & 4) whereby certain accounts and documents were requisitioned from the assessee which were as follows:

1. Copy of Return if any filed in response to notice u/s 148 issued for the A.Y. 2015-16

2 Nature of business activity carried during the year under consideration.

3 Computation of total income, 26AS.

4 Audit Report alongwith audited statement of Account and schedules for the last Three years.

5 Bank Account Statements for the financial year 2014-15 relevant to the Assessment Year 2015-16.

6. As per information available, you have claimed bogus long term capital gain of Rs. 60.65,724/- through reputed stocks namely Lifeline Securities Limited PAN: -AAACL3525A by issuing ante dated forged contract notes during the F.Y. 2014-15 relevant to the A.Y. 2015-16 However you have not disclosed the same in your ITR for the A.Y. 2015-16. Therefore, it is requested to please explain as to why an amount of Rs. 60,65,724/- may not be treated as income for the a.Y. 2015-16 from unexplained source.

The aforesaid notice dated 14/12/2021 was duly replied by the Assessee wherein requisition No. 1 was complied with. With regard to Requisition No. 2 assessee stated that she does not carry out any business and her source of income is from salary, rent and the interest income. Requisition No. 3 was complied with by providing computation of income and Form 26AS as and by way of enclosures. Requisition No. 4 was answered by stating NA. With regard to requisition No. 5 it was stated that request has been made to bank for supply of bank statement and that same has not yet been received from bank concerned. With regard to requisition No. 6 it was stated that the assessee desires source of information and copy of statement on basis of which the Department has formed the opinion that long term capital gain of Rs. 6065724/- which is otherwise not liable to tax under section 10(38) are bogus and no material is provided to the assessee to contradict the same. (page 5 & 6 of PB)

4.4 Thereafter there is issuance of another notice dated 08/02/2022 under section 142(1) of the Act whereby attention of the assessee was invited to the fact that here earlier submission u/s 142(1) is part submission and that complete reply be furnished. Attention was also invited that it is time barring assessment copy of reason was provided for which fact was recorded (page 7 & 8 of PB).

The assesse in response to this notice dated 08/02/2022 stated that in continuation of assessee earlier reply dated 14/12/2021 it is stated that the assessee has sold only 3360 shares of Indusind Bank for a consideration of Rs. 29,88,945.04. These shares were acquired on 06/04/2009 for a consideration of Rs. 113904/- and the resultant Long Term Capital Gain amounted to Rs. 28,75,041/- which has been duly credited on 17/03/2015 in the assessee’s SB A/c No. 3887000100031296 in PNB Ambala Cantt. Necessary evidence in support of same in form of purchase note and sale note were enclosed (PB page 35 & 40).

4.5 Thereafter we observe and note that there was issuance of yet another notice dated 10/03/2022 under section 142(1) of the Act wherein basis aforesaid reply and Form No. 26AS it was found that assessee has not considered following income in her return of income:-

1) Capital gain arising out of sale of 3360 shares of Indusind bank for a consideration of Rs. 29,88,745/-.

2) Sale of immovable property to Amar Deepika on 30/07/2014 for sum of Rs. 36,55,000/-.

3) Sale of immovable property to Gurpreet on 02/01/2015 for sum of Rs. 2,13,50,000/- assessee was asked to explain the above transaction and demonstrate how it is disclosed in return of income (page 11 of paper book). The assessee in response to this notice stated that she has only sold 3360 shares of Indusind bank for a consideration of Rs. 29,88,945/- which has yielded long Term Capital Gain as per details below:

This was rightly been claimed as exempt u/s 10 being not liable to capital gain as the shares sold after 31.01.2018 are liable to tax by applying face value as on 31.01.2018. As has already been clarified that assessee did not entered into any other such transactions and as such your information regarding long term capital gain of Rs 6065724/- as detailed in reasons was totally incorrect and against the facts of the case, however the assessee though made specific request to supply the complete details and source of information along with complete proposal u/s 151, the same had not been supplied so far and as such assessee was precluded to file necessary objections. The assessee has earned long term capital gain of Rs 2875041/- not liable to tax, necessary evidence in support of same has already been filed along with reply dated 11.02.2022.

As regards the sale of immovable property at Rs 3655000/- to Amar Deepika on 30.07.2014 as mentioned in 26-AS, it is clarified that this information has been misread and correct version is that Amar Deepika had sold immovable property to assessee and assessee has deducted TDS while making payment and as such Amar Deepika is seller/deductee and as such there is no question of any capital gain out of said transactions As regards the sale of immovable property at Rs 21350000/- to Gurrpeet Kaur on 02.01.2015 as mentioned in 26-AS, first of all figure of Rs 213500000/- has been misprinted against real figure 21350000/, more so, this information has also been misread and correct version is that GurpreetKaur had sold immovable property to assessee and assessee has deducted TDS while making payment and as such Gurpreet Kaur is seller/deductee and as such there is no question of anycapital gain out of said transactions.

4.6 Thereafter we observe and note that there was issuance of yet another show cause notice dt. 15/03/2022 calling upon the assessee to show cause as to why the proposed variation should not be made. It was stated therein that in your reply dt. 14/03/2022 above (Para 4.5) the assessee had earned long term capital gain of Rs. 28,75,041/- and that it is exempt under section 10 and not liable to tax but on perusal of return column D-19, it is blank where assessee is required to show ‘exempt income’. Accordingly the assessee was called explain as to why entire receipt for Rs. 29,38,945/- should not be treated as unexplained money u/s 69A of the Act. Thus an opportunity was given to assessee to show cause why proposed variation should not be made and the assessment should not be completed accordingly. (Page 14 & 15 of PB)

The assessee in response to this notice by a reply (page 16 & 17 of PB) reiterated that the assessee has only sold 3360 shares of Indusind Bank for a consideration of Rs. 29,88,945/- which yielded to him long term capital gain as per details below:

The above amount was rightly claimed as exempt under section 10 being not liable to capital gain as the shares sold after 31/01/2018 are liable to tax by applying Face Value as on 31/01/2018 & Department contention of Long Term Capital Gain of Rs. 60,65,724/-is totally incorrect.

Note: (Through assessee in this reply aired grievance about reasons for reopening, source of information, complete proposal under section 151, etc but we observe that at page 2A & 2B of Paper Book this information is provided by assessee which means they had access to this information).

It was stated that as regards the sale of immovable property at Rs. 36,55,000/- to Amar Deepika on 30/07/2014 as mentioned in 26AS it is clarified that this information has been misread and correct version is that Amar Deepika had sold immovable property to the assessee and that the assessee had deducted TDS while making payment and as such Amar Deepika is seller / deductee and therefore no capital gain.

As regards sale of immovable property at Rs. 2,13,50,000/- to Gurpreet Kaur on 02/01/2015 as mentioned in 26AS, first of all figure of Rs. 21,35,00,000/- stand misrepresented against real figure of Rs. 2,13,50,000/- more so, this information too stands misread and correct version is that Gurpreet Kaur had sold immovable property to assessee and the assessee has deducted TDS while making payment and as such Grupreet Kaur is seller / deduction and as such there is no question of any capital gain out of said transaction. The assessee in reply summed up as under:

From the above, it is clear that assessee has claimed Long Term capital gain of Rs 2875041/- as exempt u/s 10 and assessee was under impression that any income not liable to tax is need not be included in taxable income and in income tax return as well. The complete transactions are supported by purchase and sale contract notes already available on the file, more so the source of information has not been provided to assessee despite repeated requests so that assessee could file detailed objections nor person who has given statement on the basis of which case has been reopened, his statement was never supplied to assessee nor any notice u/s 133(6) was ever issued so that assessee could file objections and made request for cross-examine the person who has made a self serving statement to save himself from purview of income tax.

The assessee shall feel obliged if copy of statement on the basis of which assessment has been reopened could be confronted to assessee so that assessee could examine the same and file its detailed objections failing to which assessee re-iterate that entire reassessment proceedings has been carried out hurriedly and PCIT has also accorded his approval without application of mind. No complete proposal u/s 151 has been provided to assessee.

4.7 We also observe that after aforesaid reply on 21/03/2022 (page 16 & 17 of Paper Book) the impugned assessment order dated 23/03/2022 came to be passed u/s 147 r.w.s 144B of the Act, accepting the return of income.

4.8 Thereafter we observe that a show cause notice dt. 15/03/2022 came to be issued to the assessee under section 263 of the Act (page 18-20 of paper book) in which it was alleged that assessee is one of the beneficiaries of bogus LTCG entries amounting to Rs. 60,65,724/- (Rs. 30,24,000/- from Dayanand Singh & Rs. 30,41,724/- from Life Line Securities Ltd.) during F.Y 2014-15 relevant to A.Y. 2015-16. The Contract Notes were forged and on the date mentioned on contract notes neither shares were purchased on exchange in your name nor did the broker have these shares. LTCG was claimed as exempt under section 10(38) of the Act through investment in shares of Indusind Bank. The AO had completed the assessment by accepting your submission that you sold shares of Rs. 29,88,945.04 and earned capital gain of Rs. 28,75,041/- which was claimed exempt under section 10(38) of the Act without verifying the genuineness of the purchase of shares through stock exchanges and without verifying the payment made for these shares to the broker concerned through banking channels. No documents relating to genuineness of purchase of these shares were called for by the Ld. AO or submitted by you (Assessee) during assessment proceedings from where it could be verified that you (Assessee) had genuinely purchased the shares.

The Ld. AO has not raised any query at all about the transactions of Rs. 30,24,000/- with Dayanand Singh.

The assessment was completed without making inquiries or verification which should have been made under the facts and circumstances of the case.

Further the assessment order has been passed allowing relief without inquiring into the claim which was called for in view of the information received from the DDIT- Rohtak consequent to search conducted u/s 132 of the Act in case of Kundu Group on 25/02/2021.

In the absence of requisite inquiry as mentioned above, the AO erred in not treating the LTCG entries of Rs. 60,65,784/-as your income from unexplained sources.

It was also alleged that assessee had purchased immovable property for Rs. 2,50,05,000/- during the year under consideration but AO has failed to call for any information from assessee explaining the source of the purchase consideration paid by the assessee. That due to lack of proper inquiries, the source of investment of Rs. 2,50,05,000/- in purchse of immovable property has remained unverified.

Accordingly, the Ld. PCIT proposed to hold that assessment order dt. 23/03/2022 to be erroneous in so far as it is prejudicial to the interest of Revenue, in terms of Section 263 especially clauses (a) and (b) of the explanation 2 to Section 263 of the Act.

Be it noted ROI in response to Notice under section 148 dt.

31/03/2021 was filed on 27/04/2021 declaring income of R.s 19,23,970/-.

The assessee in response to the above show cause notice dt. 10/01/2024 stated as under:

■ Original return of income in this case was filed on 30.09.2015 vide AR no. 841681900300915 declaring an income of Rs 1923970/-. The return was processed u/s 143(1) of the IT act on income returned. The assessment was reopened u/s 148 vide notice u/s 148 dated 30.03.2021 and in response to said notice, the assessee has filed return on 27.04.2021 vide AR no. 345377510270421 declaring the same income. After filing return u/s 148, the assessee requested for supply of copy of reasons recorded which was provided to assessee and assessee written a letter to AO on 20.12.2021 which is reproduced as below:-

On request of furnishing reasons, you have mentioned information by way of Q. No. 6 which is reproduced as below:-

The assessee desired the source of information and copy of statement on the basis of which department has form the opinion that Long Term capital gain of Rs 6065724/- otherwise not liable to tax u/s 10(38) are bogus, whereas no material has been supplied to assessee to contradict the same.

Kindly supply complete details which facilitate you to form opinion that this was a bogus Long term capital gain as alleged by you whereas assessee maintains that it was real long term capital gain not liable to tax and as such same cannot be treated as income from undisclosed sources. The necessary objection shall be filed only after receiving complete details, evidence and statement on the basis of which opinion has been formed which made you to believe that income has escaped assessment.

■ Your kind attention is drawn to assessee reply in response to notice u/s 142(1) dated 08.02.2022 as below:-

In response to your aforesaid notice dated 08.02.2022 and in continuation of assessee earlier reply dated 14.12.2021, it is brought to your kind notice that assessee has sold only 3360 shares of Indusind Bank for a consideration of Rs 2988945.04. These shares were acquired on 06.04.2009 for a consideration of Rs 113904/- and resultant Long Term capital gain amounts to Rs 2875041/- only which–has duly been credited on 17;03.2015 in assessee SB A/c no. 3887000100031296 in PNB, Ambala”Cantt. Necessary evidence in support of same in form of purchase note and sale notes are enclosed herewith.

■ Your kind attention is drawn to assessee another reply in response to notice u/s 142(1) dated 10.03.2022 as below:-

It is re-iterated that assessee has only sold 3360 shares of Indusind Bank for a consideration of Rs 2988945/- which has yielded Long term capital gain as per details below:-

Sale Proceeds on 17.03.2015 2988945.04

Less: Purchase on 06.04.2009 113904.00

Long Term Capital Gain 2875041.00

This was rightly been claimed as exempt u/s 10 being not liable to capital gain as the shares sold after 31.01.2018 are liable to tax by applying face value as on 31.01.2018. As has already been clarified that assessee did not enter into any other such transactions and as such your information regarding long term capital gain of Rs 6065724/- as detailed in reasons was totally incorrect and against the facts of the case, however the assessee though made specific request to supply the complete details and source of information along with complete proposal u/s 151, the same had not been supplied so far and as such assessee was to file necessary objections. The assessee has only earned long term capital gain of Rs2875041/- not liable to tax, necessary evidence in support of same has already been filed along with reply dated 11.02.2022.

As regards the sale of immovable property at Rs 3655000/- to Amar Deepika on 30.07.2014 as mention in 26-AS, it is clarified that this information has been misread and correct version is that Amar Deepika had sold immovable property to assessee and assessee has deducted TDS while making payment and as such Amar Deepika is seller/deductee and as such there is no question of any capital gain out of said transactions.

As regards the sale of immovable property at Rs 21350000/- to Gurpreet Kaur on 02.01.2015 as mention in 26-AS, first of all figure of Rs 213500000/- has been misprinted against real figure of Rs 21350000/-, more so, this information has also been misread and correct version is that Gurpreet Kaur had sold immovable property to assessee and assessee has deducted TDS while making payment and as such Gurpreet Kaur is seller/deductee and as such there is no question of any capital gain out of said transactions.

Then after a SCN dated 15.03.2022 was issued as is necessary desired within the meaning of section 144B(1)(xii) of IT Act, In response to which the assessee has furnished following reply:-

From the above, it is clear that assessee has only earned & claimed Long Term capital gain of Rs 2875041/- as exempt u/s 10 and assessee was under impression that any income not liable to tax is need not be included in taxable income and in income tax return as well. The complete transactions are supported by purchase and sale contract notes already available on the file, more so the source of information has not been provided to assessee despite repeated requests so that assessee could file detailed objections nor person who has given statement on the basis of which case has been reopened, his statement was never supplied to assessee nor any notice u/s 133(6) was ever issued so that assessee could file objections and made request for cross-examine the person who has made a self-serving statement to save himself from purview of income tax.

The assessee shall feel obliged if copy of statement on the basis of which assessment has been reopened could be confronted to assessee so that assessee could examine the same and file its detailed objections failing to which assessee re-iterate that entire reassessment proceedings has been carried out hurriedly and Hon’ble PCIT has also accorded his approval without application of mind. No complete proposal u/s 151 has been provided to assessee.

In the above circumstances, the assessee does not accept proposed variation of Long term capital gain of Rs 2875041/- to be added in income tax return u/s 69A of IT Act.

From the above, it is clear that on the basis of material available on record, the AO has not made any addition after considering material available on record, evidences submitted by the assessee, contract notes, Demat A/c and thus AO has duly applied his mind before passing assessment order.

The presumption that the Assessing officer has duly applied his mind cannot be easily discarded. The revisionary powers cannot be exercised without setting out the error in the order and prejudice caused to the revenue.

(1) 1/2 share in property village Buranwala, Tehsil Baddi, Dist. Solan

(2) As regards the purchase of property at Rs. 21350000/-, it is clarified that assessee has purchased 1/4 share in H.No. 1065, Sector – 27B, Chandigarh vide registered sale deed dated 30.12.2014 as per details below:

(3) As regards the source of investment, the assessee has made investment under debit to his SB A/c No. 3887000100031296 in PNB, Ambala Cantt as per details given below:

It is further averred in reply to the show cause notice that revisionary jurisdiction cannot be invoked. Necessary evidence in support of investment made towards properties are enclosed which clearly explains the source of investment. Further this was not the reasons for reopening of assessment under section 147/148. The assessee has placed reliance on pages 43 to 65 of paper book where necessary evidence is place on record of this Tribunal with regard to purchase of immovable properties. With regard to sale of shares Reliance is placed on 41-42 of paper book. We have perused the documents from page 43 to 65 of paper book with regard to purchase of property.

4.10 We notice that yet another notice dated 26/02/2024 was issued to the assessee in course of revision proceedings u/s 263 of the Act wherein following queries were raised:- (i) That on 06/04/2009 shares worth Rs. 1,13,904/- were purchases by the assessee. Please confirm whether these shares were purchased online through stock exchange or offline. Also furnish documentary evidence with regard to purchase of shares.

(ii) Please explain the mode of payment for purchase of shares in F.Y. 2009-10. If payment was made through bank account, please furnish bank account statement of relevant period.

(iii) Please furnish Demat Account statement for the period 01/04/2009 to 31/03/2015.

The hearing was fixed for 01/03/2024 before PCIT. In reply dt. 01/03/2024 (page 30 to 34 of paper book) and (35 to 42 of paper book) to the aforesaid notice dated 26/02/2024, it was brought to the notice of PCIT that during the course of the assessment proceedings it was placed on the file of AO that shares were acquired on 06/04/2009 for Rs. 1,13,940/- and that the same were acquired out of cash available by the Assessee which were generated out of declared income for A.Y. 2009-10 and details of return were furnished. It was further stated that return of A.Y. 2010-11 was too filed and its details were furnished. It was finally contended that assessee had enough cash to make investment of Rs. 1,13,904/-. An affidavit to this effect was placed on record. The shares were purchased through an agent. With regard to Demat Account assessee stated that she did not had any Demat Account prior to 01/04/2014.

4.11 Basis above material we notice that the PCIT passed the impugned order u/s 263 of the Act which is impugned in the present appeal.

4.12 The Ld. PCIT in the impugned order has observed that (i).The case of the assessee was reopened u/s 147 of the Act on the basis of information uploaded on Insight Portal by the Investigation wing that the assessee was one of the beneficiaries of bogus LTCG entries amounting to Rs. 60,65,724/- (Rs. 30,24,000/- from Dayanand Singh and of Rs. 30,41,724/- from Lifeline Securities Ltd.) during F.Y. 2014-15 relevant to A.Y. 2015-16.

As per the information received, a search was conducted u/s 132 of the Income Tax Act, 1961, in the case of Tradenext Securities Limited (Erstwhile Lifeline Securities Limited) along with Kundu Group of Rohtak on 25.02.2021. Statement of the director and authorised signatory of Lifeline Securities Limited was recorded in which he stated that the Contract notes issued by the company Lifeline Securities Limited were bogus and fabricated and were not signed by any of the directors of the company. No transactions as mentioned in the Contract notes were done on the Exchange. Shares were purchased from exchange through conduit accounts just before the sale of shares by the final beneficiaries and transferred through off market transfer to the account of Lifeline Securities Limited. The same shares were transferred through off market transfer to the account of ultimate beneficiaries. The modus operandi was to purchase shares in the name of dummy persons and credit them off market to the final beneficiaries. Bogus contract notes were issued to the final beneficiaries to backdate the purchases by them to claim false exempt LTCG whereas the real nature of transactions was that of an accommodation entry.

The name of the assessee appears at serial no. 1044ofthe List ofbeneficiaries annexed with the above verification report uploaded by the Investigation wing as per which she was shown to have purchased shares through the broker Lifeline Securities Limited.

The contract notes were forged and on the date mentioned on contract notes, neither shares were purchased on the Exchange in the name of the assessee nor did the brokers have these shares. LTCG was claimed as exempt u/s 10(38) of the Act by the assesse whereas it was an accommodation entry.

(ii) The AO accepted the reply of the assesse and her claim of LTCG in a casual and cursory manner.

In the Purchase Contract Note of Life Line Securities Ltd., New Delhi, the assessee is mentioned to have purchased 3360 shares of Indusind Bank for Rs. 1,13,904/-. No payment for the same is mentioned in the Purchase Contract Note. During assessment proceedings, no proof of payment for purchase of shares was furnished by the assessee. The AO also did not call for this information and did not examine the genuineness of purchase of shares.The AO erred in not taking cognizance of the facts mentioned in the above report of the Investigation Wingon the basis of which the case of the assessee was opened u/s 148 of the Act. There was specific information gathered during search that that the broker Lifeline securities limited was issuing bogus contract notes to enable the ultimate beneficiaries to backdate the purchase of shares and claim exempt long term capital gain whereas the actual transaction was of accommodation of unaccounted income/money of the assessee. On the dates mentioned in the contract notes, neither shares were purchased on the Exchange nor the share broker Lifeline Securities Limited had these shares in its Demat account on these dates. The contact notes issued by Lifeline securities limited were forged and false contract notes. The purchase of shares by the assessee, was not genuine. (The assessee was one of the beneficiaries appearing at serial no. 1044 of the list of beneficiaries and had received Rs. 30,41,724/- from Lifeline Securities Ltd.)

Despite the incriminating information available against the assessee, the AO did not confront this to the assessee and did not ask her to establish the genuineness of purchases. The assessee was not asked to discharge its primary onus to establish the genuineness of her claim that the shares of INDUSIND Bank were purchased by her in FY 2009-10. No requisite enquiry was made by the AO as was called for in view of the Verification Report uploaded by the investigation wing after making detailed inquiries during search and post search investigation.

During proceedings u/s 263 of the Act, the assessee was asked to furnish proof of payment made for purchase of shares in FY 2009-10 along with bank account statement and Demat account statement. In reply dated 01.03.2024, the assessee submitted that shares were purchased in cash during FY 2009-10 and that she did not have any Demat account prior to 01.04.2014.The purchase of shares is offline and there is no proof of payment of the shares in FY 2009-10. The assessee failed to produce any documentary evidence of payment made for purchase of shares and submitted an affidavit that shares had been purchased by her in FY 2009-10 in cash. The affidavit is only a self-serving documents.

In the absence of any proof of purchase of shares in FY 2009-10 produced by the assessee and further the positive facts found as a result of search action as reported in the verification report of the Investigation Wing, the claim of the assessee that sum of Rs. 30,41,724/- credited in her bank account was on account of sale of shares was a false claim. An addition of the same was required to be made u/s 68 of the Act. The claim made by her in the return of income of exempt LTCG was also a false claim and was required to be disallowed.

The AO erred in not taking cognizance of the facts mentioned in the report of the Investigation Wing. The amount of Rs. 30,41,724/- was omitted to be assessed as income of the assessee from unexplained sources though the proceedings u/s 148 had been initiated on this very ground. It is not a case of inadequate enquiry but of NO enquiry.

Per contra we observe that the assessee during the course of the assessment proceedings before Ld. AO was expressly asked to produce accounts, documents and explanations with regard to the claim of long term capital gain of Rs. 60,65,724/-. It was alleged that assessee has used bogus (forged contract notes issued by Life Line Securities ltd. PAN No.: AAACL3525A who has issued Antedated forged contract notes during F.Y. 2014-15 relevant to A.Y. 2015-16 the same was not declared by the assessee in ITR for A.Y. 2015-16. Hence why addition should not be made as unexplained source. (Page 4 or 40 of Paper book notice dt. 14/12/2021 under section 142(1))The assessee replies this notice to Ld. AO by stating that long term capital gain claimed is real one and not liable to tax. Assessee sought complete details evidence and statement on basis of which department was making such allegation. (Page 6 of paper book reply to notice dt. 14/12/2021). We observe that by notice dt. 08/02/2022 (page 7 & 8 of paper book) the Department sought full and complete reply on above query raised. The assessee by reply (page 9 of paper book) stated that She had acquired 3360 shares of Indusind bank for a consideration of 1,13,904/- on 06/04/2009. It was further stated that these shares were sold for a consideration of Rs. 29,88,945.04 & proceeds thereof were credited on 17/03/2015 in assessee bank Saving Bank account no. 3887000 100031296 in PNB Ambala Cantt. Purchase Note / Purchase Contract Notes and Sale Note/Sale Contract Notes were enclosed. These purchase contract note and sale contract note are at pages 35 & 40 of paper book. We hold that once the assessee has submitted these documents basis which LTCG is claimed as exempted it is incumbent upon the Ld. AO to have examined and verified these documents. But it appears strongly from the assessment order these documents were checked and verified. While it is true that how these documents were checked and verified is not stated expressly in so many words yet fact remains that Ld. AO had checked and verified those documents. In so far as assessee is concerned he / she has no control how such documents must be checked and verified. The assessee has no control over theverification and investigation skills of Ld. AO. We hold that while carrying out checking and verification of documents immediate superior officer of Department have administrative control over Ld. AO and in what manner AO exercises his power. The assessee thus has no role. The role of the assessee comes to an end upon submission of documents which in the instant case was done (supra). Further it is wrong finding by Ld. PCIT to have held that there was already an information available with the Ld. AO about fraudulent practices resorted to by Life Line Securities Ltd. and about modus operandi adopted by them in giving accommodation entries and Ld. AO ought to have seen this and further ought to have taken cognizance of the same, basis which assessee’s case was reopened u/s 148. The Assessee never preventedLd.AO after the submission of purchase contract notes, not to verify and cross check the details mentioned in the purchase contract note. It was entirely upto Ld. AO to have tallied the purchase contact notes details with information and material available with Department before accepting the ROI. If AO has faulted on investigative and verification skills the assessee cannot be blamed. The initial burden of proof of producing document basis which LTCG of Rs. 2875041.00 was claimed was thus discharged and to establish contrary was the responsibility of the Ld. AO which too has not happened as after checking and verifying AO found all to be order and accepted ROI. PCIT thus h as erred in law in impugned order on this score. Further by virtue of Section 263 the PCIT has been even vested with power of “making or causing to be made such inquiry as he deems necessary” but in the instant case no such even bare or primafacie inquiry with regard to purchase contract notes which was alleged to have been as bogus and fraudulent was made. We therefore hold that it was a fit case at least primafacie for PCIT to have made minimum bare inquiry to establish whether purchase contract note was out of scam, which was perpetrated and bogus. Unfortunately this bare minimum exercise is not done despite mandate of law. Even assuming this power is discretionary as statute uses the word “as he deems necessary” but that does not mean that arbitrary he chooses not to make bare inquiry to establish a primafacie fact particularly so when allegation pertains to bogus nature of contract note in purchase of securities listed on stock exchange. Nothing prevented PCIT to have called for information from exchange whose data on purchase and sale of securities are computerized and are well achieved both by name of assessee and so also trading member of exchanges with their respective PAN No. We hold that credit entry of Rs. 29,88,945.04 dt. 17/03/2015 on PNB bank statement on 61 of Paper book gets corroborated by sale bill of DSE Financials Services Ltd. on page 42 of Paper Book.

4.13 The Ld. PCIT in the impugned order has with regard to purchase of two immovable properties purchased by has observed that another issue on which SCN u/s 263 was issued is that the AO failed to make requisite inquiry regarding the source of investment of Rs. 2,50,05,000/- made in purchase of immovable property by the assessee during the year under reference. This information was available on record in 26AS.

During assessment proceedings, the AO issued a questionnaire on 10.03.2022. In which the assessee was wrongly asked to explain/give details of sale of immovable properties. In response to it, the assessee filed reply dated 14.03.2022 stating that the AO had misread 26AS. No immovable property was sold by the assessee during the year and that the assessee had actually purchased two immovable properties during the year under assessment. That Tax was duly deducted by her at the time of payment to the seller hence, there was no question of capital gain. However, no source of investment was furnished by the assessee. The AO also failed to make any inquiry with regard to source of investment of Rs.2,50,05,000/- from the assessee and left the verification incomplete. It is not a case of inadequate enquiry but of NO enquiry on this issue.

The assessment order is erroneous in so far as it is prejudicial to the interest of the revenue on this account as per clauses (a) and (b) of Explanation 2 to Sec 263 of the Act.

During proceedings u/s 263 of the Act, the assessee has simply stated that the investment of Rs.36,55,000/- and of Rs.2, 13,50,000/-was made out of her declared sources and out of her bank account by the Assessing Officer in assessment proceedings. Return of income for A.Y. 2015-16 has been filed by the assessee declaring total income of Rs. 19,23,970/- only.

We observe that by notice dt. 10/03/2022 issued in terms of section 142(1) of the Act Ld. AO had sought information on immovable property sold to Amar Deepkia on 30/07/2014 for sum of Rs. 36,55,000/- and further one more property to Gurpreet Kaur on 02/01/2015 for sum of Rs. 2,13,50,000/- on this score the assessee in reply (page 12 & 13 of paper book) had clearly stated that Department has misread the information on 26AS as it is case of purchase and not sale. The assessee then gave correct version that Amar Deepika is seller and assessee is buyer. It is the assessee who has deducted the TDS. Since it is a buy transaction question of capital gain does not arises at all. IN so far as sale of immovable property at Rs. 2,13,50,000/- to Gurpreet Kaur on 02/01/2015 was concerned, the assesseee contended that figure of Rs. 2,13,50,0000/- in 26AS is incorrect and correct / real figure is of Rs. 2,13,50,000/-. Further even this information is misread and that correct version is that Gurpreet Kaur is seller who had sold the TDS while making payment. Gurpreet Kaur is seller and there is no question of any capital gain.

On this score we notice that while it is true that Ld. AO had misread the information on immovable property for Rs. 2,50,05,000/-(aggregate value of two properties) the Ld. AO failed to call for any information from assessee explaining the source of purchase consideration. In the show cause notice under section 263 this fact was highlighted and the assesse had given explanation along with documentary proof in form of purchase deeds pages 43-59 (both properties) and further the assessee has also provided copy of bank account and loan account details. We hold that Ld. PCIT ought to have accepted the version of the assessee in reply (page 26 of paper book) that Ld. AO did not investigate the matter further probably when it reached the conclusion that if no addition on account of reasons recorded is being made then no addition on any other count could be made. Reliance was rightly placed by the assessee on the judgement of Gujarat High Court in case of CIT v. Mohmed Juned Dadlani355 ITR 172 (Gujarat) with which we too conquer. Further we have perused the reasons for reopening u/s 147/148 of the Act at page 2 B of paper book where no reasons have been given to reopen the assessment on this score of purchase of immovable properties. We further hold that merely because ROI for A.Y 2015-16 is filed for Rs. 19,23,970/-is no ground to order fresh assessment proceedings basis order u/s 263. Assessee in any case has given plausible explanation in reply and Ld. PCIT ought to have considered the same and ought to have made some bare minimum enquiry before ordering fresh assessment no such step was taken under section 263 despite express provision in this regard u/s 263 therefore the impugned order is bad in law, not proper and illegal within the meaning of Section 263 of the Act and accordingly we set aside the same on both counts on basis of which fresh assessment is ordered.

4.14 We also hold that during the course of the proceedings u/s 147/148 of the Act several queries were raised and that the same were properly replied by the assessee. The same were duly considered. There was a “checking and verification” which fact is recorded. Therefore in law it cannot be said that assessment u/s 147/148 of the Act was done by Ld. AO without conducting any inquiry and verification& the case is one of no inquiry.

4.15 The Ld. PCIT in the impugned order has failed to establish erroneous character of assessment order and that too in such a manner that it is prejudicial to the interest of Revenue.

4.16 We further hold that in the assessment proceedings where Ld. AO is consciously satisfied with the material on record, does checking and verification and accepts the return of income then such an assessment order cannot be called erroneous and prejudicial to the interest of Revenue. In the instant case all this has happened.

4.17 We also hold that in proceedings u/s 263 reply to the show cause notice and all other queries of Ld. PCIT is satisfactorily given to establish that order in assessment of Ld. AO is not erroneous and prejudicial to the interest of Revenue so as to warrant invocation of provision under section 263 of the Act.