The Income Tax Appellate Tribunal (ITAT), Kolkata Bench ruled that the revisional Power exercised by CIT(A) based on ‘cut & paste’ reasoning is invalid.
Facts of the case:-
The assessee, Satish Kumar Lakhmani has raised a legal issue wherein he has challenged the assumption of jurisdiction under section 263 of the Income Tax Act, 1961 which according to him, the Pr. CIT does not enjoy the facts and circumstances of the case. The assessee submitted that since the AO had carried out an enquiry into the issue of gain from the sale of shares (LTCG), the impugned action of AO to have moved a proposal to the Pr. CIT to invoke his revisional jurisdiction u/s. 263 of the Act, is akin to the AO trying to do indirectly what he (AO) cannot do directly.
Interpretation of law:-
As per section 263 of the Act, the revisional jurisdiction can be exercised by the Ld. Pr. CITin is his sole discretion. According to the assessee, this power is given to the Pr. CIT for supervising the work of his officers discharging the duties under him and this discretion given to him by the statute cannot be delegated to any other officer especially not to AO.
The Coram of J. S. Reddy and A.T. Varkey observed that that pursuant to CASS, the AO had taken note of this issue i.e. Suspicious Long Term Capital Gain on Shares (inputs from the Investigation Wing) [ LTCG] and has called for the documents from the assessee to substantiate the genuineness of the transaction and pursuant to which the assessee had filed the documents, which the AO in his assessment order has acknowledged to have verified from the share trader, which facts are evident from the perusal of the original scrutiny assessment order. So, the AO’s action on the issue of accepting the claim of the assessee in respect of LTCG which the Ld Pr CIT would like to rake up bypassing the impugned order has already undergone enquiry by the AO; meaning the AO’s action in the first round cannot be termed as a case of “no enquiry” on the issue of LTCG.
“Resultantly, the Ld. Pr. CIT cannot brand the action of AO to accept the claim of assessee in respect of LTCG as a case of no enquiry on the part of AO to term it as an erroneous order; and which finding could have facilitated him to usurp/interfere by exercising his revisional jurisdiction u/s. 263 of the Act. Further, we should bear in mind that in case if he wanted to interfere in the present case (since AO had enquired) then he (Ld. Pr. CIT) himself ought to have conducted enquiry to bring out the fallacy as to show how the enquiry conducted by the AO was erroneous,” the ITAT said.