Vinay Kumar Sogani Vs PCIT (ITAT Mumbai)
Vinay Kumar Sogani challenged the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961, 1 which sought to revise the assessment order for the assessment year 2013-14. The Pr. CIT had deemed the Assessing Officer’s (AO) order erroneous and prejudicial to the revenue’s interest, primarily because the AO had allowed the assessee’s claim for exemption under Section 10(38) for long-term capital gain (LTCG) on the sale of shares without proper verification, especially in light of information from the CIB (I&CI) and the Investigation Wing, Patna, suggesting penny stock manipulation. The Pr. CIT noted that the AO’s scrutiny seemed limited to disallowance under Section 14A and directed a fresh assessment on the LTCG exemption, considering the information about alleged accommodation entries.
However, the ITAT found that during the original scrutiny assessment, the AO had indeed issued a detailed notice under Section 142(1) specifically asking for comprehensive details and supporting evidence for the LTCG exemption claim. The assessee had provided extensive documentation, including demat account details, purchase and sale contract notes, bank statements showing payments, share certificates, and details of the company merger that led to the shares in question. The AO, after examining these records, had accepted the assessee’s claim. The ITAT observed that while the assessment order lacked a detailed discussion of this verification, the fact that the AO called for and received the relevant evidence could not be ignored. The Tribunal held that once an inquiry has been conducted and a conclusion reached by the AO, even without extensive documentation in the order, a revision under Section 263 is not justified unless the Pr. CIT finds fault with the evidence itself. The ITAT also noted that the information from the Patna investigation was received after the AO had already completed the assessment.
