Case Law Details
Ritin Lakhmani Vs PCIT (ITAT Kolkata)
In this case The ld. Pr. CIT has simply cut and pasted para 5 to para 5.12.3 and also para 6 from the orders he had passed u/s 263 of the Act from the order of the Pr. CIT passed u/s 263 of the Act in the case of M/s. Girish Tikmani & Others. Only in para 7, the quantum of addition, or the figures of addition have varied from case to case. This shows that the same general observations and reasons have been given by the ld. Pr. CIT in all cases where he took action u/s 263 of the Act, in cases where there was a claim of deduction u/s 10(38) of the Act on LTCG and where the claim was accepted by the AO.
Based on this “cut and paste” reasoning, the ld. Pr. CIT has directed the AO to make additions u/s 68 of the Act of the entire sale consideration received by each of the assessees on the sale of shares, as well as addition u/s 69C of the Act, of an assumed commission payment u/s 69C of the Act. No evidence is brought on record except for stating generalities. SIT recommendations were cited, but these do not have any reference to these assessees. This, in our view cannot be a ground for the Pr. CIT to give specific directions to the AO to make certain additions. The assessee is not confronted by any adverse material. No reference has been made to any specific adverse material. When the assessee is not confronted with any material no amount can be directed to be added by the ld. Pr. CIT, on the basis of suspicion, or material in the public domain on the general modus operandi adopted in such cases. It is necessary for the ld. Pr. CIT to have conducted his own enquiries, collected adverse material and confronted the assessee with such adverse material, consider the replied and only after following the principles of natural justice, he could have directed the additions in question against the assessee. Additions cannot be made based on general reasoning or some supposed material in the public domain which was never brought on record. Such direction is arbitrary and has to be struck down as bad in law.
The AO in this case has called for details and thereafter made enquiries with the parties by issuing notices u/s 133(6) of the Act. Only on receiving replies from third parties, the AO came to a conclusion that he could not find any discrepancy in the claim of the assessee for exemption u/s 10(38) of the Act. The Pr. CIT has not pointed out as to what was the deficiency in these enquiries of the AO and as to what are the further enquiries the AO should have done.
The ld. D/R had stated that orders were passed by various authorities including ITAT on this issue, and that decisions were in some cases in favour of the assessee and in some cases in favour of the Revenue. The AO had taken a possible view, after making his enquiries and admittedly this view is supported by some judicial decisions. The ld. Pr. CIT has not specified as to what was the nature of enquiry that the AO has failed to do, nor he has stated the extent of enquiry that was required to be done in such cases and when he has not conducted any enquiries himself, no addition can be directed based on “cut and paste” reasoning from orders of other assessees that additions should be made u/s 68 and 69C of the Act. In our view, such conclusion by the ld. Pr. CIT is not in accordance with law. It would have been another matter, had the ld. Pr. CIT restored the issue to the file of the ld. AO for fresh adjudication in accordance with law after giving the assessee adequate opportunity of being heard. This was not done.
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