Gau). The view earlier taken in Rajendra Singh v. Superintendent of Taxes & Ors.

Aggrieved by the order of the Tribunal, the Revenue has preferred this a ppeal which was admitted for consideration of the following substantial question of law :- (cid:28)Whether on the facts and in the circumstances of the case, the Tribunal was jus tified and correct in law in cancelling the order of the CIT dated 23.8.2006 pas sed u/s 263 of the Income-Tax Act, 1961 ? (cid:29) This appeal was tagged for consideration with I.T.A. No.2 of 2008 wherei n question of scope of jurisdiction under Section 263 of the Act had been referr ed to a Full Bench. The Full Bench considered the matter vide judgment dated 7.2.2012 and he ld that jurisdiction under Section 263 of the Act could be exercised whenever it was found that the order of the assessment was erroneous and prejudicial to the interest of the Revenue. A wrong assumption of fact, incorrect application of l aw and non application of mind were also covered within the scope of Section 263 of the Act, as held by a Division Bench of this Court in Commissioner of Incom e-Tax vs. Daga Entrade P. Ltd. (2010) 327 ITR 467 (Gau). The view earlier taken in Rajendra Singh vs. Superintendent of Taxes and others, 1979 STC 10 that juris diction under Section 263 could be exercised only in cases of jurisdictional err or was explained to the effect that the expression (cid:28)jurisdictional error (cid:29) was us ed in wider sense as including error on account of wrong assumption of fact, inc orrect application of law and non-application of mind. The matter was, accordin gly, directed to be placed before the Division Bench. I.T.A. No.2 of 2008, has been disposed of today by a separate order, hol ding that exercise of jurisdiction by the Commissioner under Section 263 of the Act was valid. Relevant observations therein are :- (cid:28)No doubt, mere different opinion was not enough for an order being termed as ’e rroneous’ but the finding of the Commissioner shows that the order of AO suffere d from non application of mind. Distinction in cases where the AO takes a view, after applying mind as per settled norms and cases where settled norms are ignor ed and assessment is made is well known. While in former, revisional jurisdictio n may not be exercised, in later it can certainly be exercised. Present case cle arly falls in second category. Whether or not exercise of revisional jurisdictio n was called for is a question of law, on a given fact situation. (cid:29) We have heard the learned counsel for the assessee. Learned counsel for the revenue is unable to assist the Court as he says that he is not ready. In the present case, the assessee claimed capital gain arising out of sa le of shares. The shares were purchased on 26.9.2002 and sold on 18.12.2003. As already mentioned above, the purchase of the shares was made at Rs.5.52 per shar e and the same were sold at Rs.99.50 per share after about 15 months. The shares belong to Sangotricons Limited which is not a very well known company. The Asse ssing Officer, in its order, did not discuss the matter at all. The Commissioner , interfered with the order of the Assessing Officer with the following observat ions :- (cid:28)4. I have considered the facts of the case. In my view, there was an error in a pproach as also in appraisal of the facts, which led to an error in computation as well. The basic enquires, which an AO is expected to make in these circumstan ces, were omitted to be made in this case. The AO should have enquired about the existence of the company and obtained its complete address and telephone number s. He should also have obtained the annual accounts of the company as on 31.3.20 03 & 31.3.2004 so as to satisfy himself if the commercial activities of the comp any justified such a jump in the prices of shares. The price quotations of the s hares on various dates during the check-period should also have been examined to ascertain the reasonableness of the jump. What was more important is that the A O should have obtained the details of the previous holder and examined the genui neness of the alleged cash transaction. The broker named Shri Rajendra Prasad S hah should have been examined and his books of account should have been scrutini zed. The details of the ultimate purchaser should also have been obtained and th e sources of his payments should have been verified with reference to his bank a ccount. The brokers, the seller, the purchaser and the assessee himself should h ave been separately examined by the A.O. These enquiries were a must for obviati ng the possibility of secreted income having been introduced for acquiring real estate. In short, the genuineness of the transactions was not established in thi s case, which is the sine qua non for acceptance of the claim of deduction u/s 5 4F in a case like this. (cid:29) The Tribunal held the same to be erroneous as follows :- I have heard the Ld. Department Representative and perused the material (cid:28)5. available on record. In this case, in response to notices issued u/s 143(2) and 142(1), the assessee appeared and explained the return and claims made thereunde r with details as called for. From the assessment order it is evident that there were as many as 7 hearings the A.O. took and after hearing the assessee and scr utinizing the details required by him, the A.O. completed the assessment t a fig ure of Rs.84,882/-. The impugned case is a small one on which very meager revenu e is involved. The investigation expected from an Assessing Officer would depend on the volume of business and quantum of income. When a small case is fixed and the A.O. calls for details, examines the same and passes a brief order acceptin g the returned income, that would not lead to treat the order as erroneous. & &. It is not the case of the C.I.T. that the claim made by the assessee is not in accordance with law. The only objection of the C.I.T. was that the A.O. b efore allowing such claim did not call for and examined the details which, accor ding to the C.I.T., were required to adopt the right view. To reiterate, the A.O . after hearing the assessee on several occasions and examining the details requ isitioned by him framed the assessment u/s.143(3) of the Act. (cid:29) Learned counsel for the assessee supports the view taken by the Tribunal by submitting that the finding recorded by the Tribunal was a finding of fact w hich was not challenged as perverse by the Revenue. It was also submitted that m erely because the Assessing Officer, should have gone deeper into the matter or should have made more elaborate discussion could not be a ground for exercising of jurisdiction under Section 263 of the Act. In support of his submission, reli ance has been placed on the judgments of the Bombay High Court in Commissioner o f Income-Tax Vs. Gabriel India Ltd. (203 ITR 108), Commissioner of Income-Tax Vs . Development Credit Bank Limited (2010) 323 ITR 206 (Bom) and judgment of the D elhi High Court in Commissioner of Income-Tax vs. Hindustan Marketing and Advert ising Co. Ltd. (2012) 341 ITR 180(Delhi) and judgment of High Court of Punjab an d Haryana in Commissioenr of Income-Tax Vs. Unique Autofelts (P) Ltd. (2009) 30 DTR (P&H) 231. We are of the view that the Commissioner was justified in exercising his jurisdiction under Section 263 of the Act and the Tribunal committed patent err or of law. It is well settled that jurisdiction under Section 263 can be exercised whenever it is found that the order of the assessment was erroneous and prejudic ial to the interest of the Revenue. Merely because a different view could be ta ken on a debatable issue may not be enough to hold that the order was erroneous. However, if the order of the AO was based on wrong assumption of facts, incorre ct application of law or non application of mind, interference was certainly per missible. Reference may be made to the decision of the Full Bench referred to ab ove, relying on the earlier judgments, including the judgment of the Hon’ble Sup reme Court in Malabar Industrial Co. Ltd. Vs. C.I.T. (243 I.T.R. 83). The present case is not a case were the Commissioner has sought to subst itute his opinion for that of the Assessing Officer but a case where the order o f the Assessing Officer suffers from non-application of mind. The Assessing Offi cer failed to make basic enquiry, required to be made when there was unusual inc rease of prices of shares purchased by the assessee by cash and the identity of the persons from whom the shares were purchased and to whom the shares were sold , was not ascertained, nor the broker examined. The shares were not of well know n company and possibility of undisclosed income being introduced in the form of capital gain was not ruled out. Thus, the case was clearly within the purview of exercise of suo-motu revisional jurisdiction. The observation of the Tribunal t hat since as many as 7 hearings had taken place and that the C.I.T. could not ha ve raised an objection to the manner of assessment, are unsustainable in law and not warranted by legal requirement under Section 263 of the Act for exercise of suo-motu revisional jurisdiction. Judgments relied upon on behalf of the assess ee are distinguishable on facts. Thus, the substantial question of law raised is answered in favour of th e Revenue. The appeal is allowed.