Order passed in cryptic manner cannot make it erroneous

Smt. Nagina Kochar Vs PCIT (ITAT Chandigarh)

Held that the mere fact that the assessment order has been passed in a cryptic manner, by itself cannot make the order erroneous or pre-judicial to the interest of Revenue. Accordingly, revisionary powers under section 263 of the Income Tax Act not invocable.

Facts- The AO as per the cryptic order passed records that notice was issued to the assessee u/s 143(2) alongwith further notice u/s 142(1) alongwith questionnaire through ITBA. The AO accepted thereafter the returned income which consisted of her income from salary, rental income, capital gain and “income from other sources”. This order dated 26.11.2018 was set aside by the ld. PCIT after show causing the assessee and considering the reply filed. Aggrieved by this, the assessee is in appeal before the ITAT.

The short issue for consideration in the present appeal is whether the order passed by the AO dated 26.11.2018 on the basis of material available on record can be said to be erroneous and prejudicial to the interests of the revenue or not as has been held by the ld. PCIT.

Conclusion- Held that AO before passing of the order has made full and adequate enquiries on these issues. Accordingly, we find that the order passed by the ld. PCIT on this issue cannot be sustained.

Held that the mere fact that the assessment order has been passed in a cryptic manner, by itself cannot make the order erroneous or pre-judicial to the interest of Revenue. If as per record the order is passed after making full and proper enquiries on the issues and after examining of the facts and the view taken is legally sustainable, the assessment order is a valid order in the eyes of law. We further find that merely because there is no discussion on the issues in the assessment order, this fact by itself also cannot lead to the conclusion that the order is an order passed without looking into the relevant facts.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

The present appeal has been filed by the assessee wherein the correctness of the order dated 26.03.2021 of Pr.CIT, Chandigarh-1 pertaining to 2016-17 assessment year has been assailed on the following grounds :

1 That the Ld. Principal Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set-aside the assessment order dated 26.11.2018 passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction under section 263 of the Act is beyond his competence.

2 That the Ld. Principal Commissioner of Income Tax has erred in failing to consider the various replies and submissions placed on record in proceedings before her in the correct perspective which is arbitrary and unjustified.

3 That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted to by the Principal Commissioner of Income Tax is unwarranted and uncalled for.

4 That the issues in respect of investment in bonds u/s 54EC as well as sale of shares was scrutinised by the Assessing Officer in depth and as such revising the order passed by the Assessing Officer is arbitrary and unjustified.

5 That the Ld. Principal Commissioner of Income Tax has failed to carry out any enquiry during the course of revisionary proceedings in respect of the issues being raised by her which is mandatory and as such the order passed by her is arbitrary and unjustified.

6 That the order of Commissioner of Income tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law.”

2. In the facts of the present case, the assessee returned an income of Rs.19,44,840/- in the return filed on 22.07.2016. Subsequently, the assessee filed a Revised return on 27. 10.2016 declaring an income of Rs.29,55,280/-. The case of the assessee was selected for a limited scrutiny through CASS for the following reason :

“(i) Large deduction claimed u/s 54B, 54C, 54D, 54G, 54GA (Schedule CG of ITR )”

2.1 The AO as per the cryptic order passed records that notice was issued to the assessee u/s 143(2) alongwith further notice u/s 142(1) alongwith questionnaire through ITBA. The AO accepted thereafter the returned income which consisted of her income from salary, rental income, capital gain and “income from other sources”. This order dated 26. 1 1.2018 was set aside by the ld. PCIT after show causing the assessee and considering the reply filed. Aggrieved by this, the assessee is in appeal before the ITAT.

3. Inviting attention to the grounds raised and the facts on record, the ld. AR submitted that the arguments of the assessee before the ITAT are two fold.

4. Addressing the Show Cause Notice issued by ld. PCIT, it was submitted, his objection to the impugned order is on the ground that the issue had been fully enquired into by the AO before the passing of the order. Hence, the conclusion drawn by the ld. PCIT, it was submitted, is incorrect on facts. It was argued that the AO had made all due enquiries in the course of the assessment proceedings. It was also his submission that even otherwise the order passed is incorrect as the ld. PCIT has either carelessly or deliberately chosen to rely exclusively on Clause-16 of the MOU incorrectly and despite the assessee’s written submissions on record has chosen to ignore for no stated reasons, the various other clauses of the very same MoU. Reading from the record, it was submitted that the assessee before the AO as well as the ld. PCIT had referred to specific clauses, Clause-5 and Clause-17 which also governed the issue.

4. 1 For unstated reasons, it was argued the documents have remained ignored by the ld. PCIT.

4.2 Apart from that, it was also his submission that for claiming exemption as a result of investment in the REC Bonds, the ld. PCIT as a result of deliberately misreading the MoU has show caused the assessee and ignoring the reply has arbitrarily concluded that the exemption has been wrongly allowed. The assessee’s submission that month does not mean 30 days and the legal position that “month” is to be interpreted as the last day of the month. Reliance was placed on the concept of the British Calendar month which is a unit of month and not a lunar month as ld. PCIT has held. Referring to the relevant provision, it was his submission that the statutory mandate on “6 months” as interpreted in various orders of the ITAT it was argued that it would show that “the view taken by the AO is a correct view”. Attention was invited to the following decisions :

1. Alkaben B. Patel vs. ITO43 Taxmann.com 333(Ahm)

2. Dr. (Smt.) Sujatha Ramesh vs. CBDT87 Taxmann.com 228 (Kar)

3. Kartick Chandra Mondal vs. PCIT113 Taxmann.com 586 (Kol)

4.3 Accordingly, it was his submission that on this first issue, on which there is a notice to the assessee, the arguments on behalf of the assessee are that due enquiries have been made by the AO which are supported by the legal position thereon. The order passed by the ld. PCIT on the other hand, it was submitted, is based on a selective reading of the MOU and ignoring the legal position on the facts.

5. Addressing the direction of the ld. PCIT on the second issue addressed vide para 6 to 6.2 at pages 6 to 9 of the order, it was his submission that on this issue, no notice was given to the assessee by the ld. PCIT. Accordingly, relying upon the legal position on this issue, the first line of argument it was submitted, would be that the action was sans jurisdiction. It was also his submission that no subsequent Show Cause Notice was issued to the assessee nor any query was raised by the ld. PCIT by way of any order-sheet in the courses of the hearing. Hence, maintaining his argument that the action is sans jurisdiction, reliance was placed on CIT Vs Contimeters Electricals Pvt. Ltd.

5.1 Without prejudice to the above argument, it was also his submission that even on this issue, due enquiries have been made by the AO and in the course of the arguments, he would be able to demonstrate this fact also.

6. The ld. CIT-DR was given time to verify the factual position whether on the second issue addressed in paras 6 to 6.2 of the impugned order whether any Show Cause Notice was issued to the assessee. He was also required to ascertain whether any specific query was raised by way of any ordersheet entry by the ld. PCIT in the course of the hearing.

6.1 The ld. CIT-DR after duly verifying the position has submitted that as per record, no other Show Cause Notice was issued to the assessee on this issue Except the one extracted in the order, there was nothing else on record. It was also confirmed by him that no query in the course of the hearing by way of an ordersheet entry on the file of the ld. PCIT was also available.

6.2 Accordingly, on this issue, it was fairly submitted that he would be relying upon only the impugned order.

5. The ld. AR in the said background reverting back to the issues involved in the present appeal invited attention to the copy of the Show Cause Notice available at page 38 and 39 of the Paper Book which he agrees has been reproduced in the order itself. For ready reference, same is reproduced hereunder:

“Please refer to the return of income filed by you on 22.07.2016 declaring an income of Rs. 19,44,840/- and the revised return filed on 27.10.2016 declaring income of Rs. 29,55,280/-. Thereafter the case was selected for limited scrutiny on the issue, whether deduction from capital gains has been collected correctly and assessment in this case was completed u/s 143(3) of the IT Act, 1961 on 26.11.2018, whereby returned income was accepted by the Assessing Officer.

2. Perusal of the assessment records reveals that you have claimed and were allowed exemption of Rs. 41,00,000/- u/s 54EC of the Act in respect of long term capital gain earned on sale of shares held in a company in terms of MOU signed in August 2015 among the concerned parties. From perusal of the MOU dated 26.08.2015, it was seen that there were certain conditions in that MOU and the clause 16 of the same, which is relevant here is reproduced as under:

“on receipt of the full and final consideration by transferers, the transferees will be the 100% share holders in the company and will have 100% management control over the company”

As per clause 16 of the MOU, on receipt of full and final consideration by the transferors, the transferee would have the 100% shareholding and management control over the transferor company. The whole amount of Rs. 1,72,05,600/- was received by you vide cheque dated 24.12.2015.

3. As per record, it is seen that a sale deed (for the sale of the shares) was executed on 30 December 2015 between you and the company signed by you and the transferee company, however payment in respect of the shareholding was received through cheques on 24.12.2015. Since, the amount pertinent to sale of the shareholding in the company was received on 24 December 2015, therefore as per clause 16 of the MOU, the same was required to be taken as effective date for transfer and accordingly, investment was required to be made on or before 24 June 2016.

Since, the investment of Rs. 41,00,000/- was made after the expiry of six months from the date of receipts of the sale consideration received on account of sale of shareholding in the company, the exemption claimed by the assessee was required to be disallowed. However, the AO failed to verify the fact during scrutiny, therefore, in view of the facts stated above, it is held that the assessment framed u/s 143(3) on 26.11.2018 is erroneous in so far as prejudicial to the interest of the revenue. You are, therefore, requested to show cause as to why assessment framed vide assessment order dated 26.11.2018 u/s 143(3) of the Income Tax Act, 1961 should not be cancelled by invoking the provisions of section 263 of the Income Tax Act, 1961.

5. Your case is fixed for hearing before the undersigned on 12.03.2021 at 12:30 PM. In case of non-compliance, order U/s 263 would be passed on merits on the basis of material available on record.”

7. 1 Attention was invited to the reply of the assessee which has also been extracted in the order. Referring to the same, it was submitted that the assessee has specifically brought to the notice of the ld. PCIT that apart from Clause-16, there were various other requirements in the MoU which were needed to be fulfilled before it could be considered that the transaction stood completed. Attention was invited to Clause-5 and Clause-17 of the MoU referred for consideration of the ld. PCIT. The reply of the assessee extracted in para 3, page 3 & 4 of the impugned order heavily relied upon is reproduced hereunder :

3. In response to said notice, the counsel of the assessee submitted its reply vide letter dated 10.03.20, which is being reproduced as under:-

“This is with reference to your Notice No ITBA/REV/F/REF1/2020-21/1031288517(1) dated 06.03.2021. In this regard, it is submitted that the appellant has objection for cancellation of Assessment Order dated 26.11.2018 passed u/s 143(3) of Income Tax Act, 1961 on the following grounds:-

1) The appellant entered into Memorandum of Understanding for share purchase and taking over of company management on 28/08/2015. As per Clause 5 of the Moil which read as under:

“The effective date of takeover by transferred will be after payment of 100% payment and transfer of 100 shares by the transferors on or before 25 th February 2016 and all liabilities and claims for the past period will be responsibility of transferors”

2) Clause 16 of the MoU reads as under:

“On receipt of the full and final consideration by transferors, the transferees will be the 100% shareholder in the company and will have 100% management control over the company.”

The same is conditional on various conditions which have to be fulfilled and cannot be read in isolation. It has to be read in conjunction to the other clause of MoU.

3) Clause 17 of MoU reads as under:

“On receipt of the full and final payment, the transferors will execute transfer deeds and sale deed duly witnessed handover all original share certificates, all statutory records, all original property title documents and all accounting records to transferees. The transferor will make entries in the statutory register and record all its minutes in the minutes to Directors and Shareholders till the date of final completion of all obligations under this agreement and intimation of all necessary and relevant matters will be duly filed with the Registrar of Companies”

Thus clause 16 cannot be read in isolation and has to be read with Clause 17 and other clauses and conditions laid down in MoU.

4) Transaction does not conclude on mere receipt of payment but on fulfillment of other conditions as laid down in MoU.

5) I enclose herewith copy of sale deed dated 30/12/2015 which is part and parcel of the MoU. The payment was made few days earlier only to facilitate the execution of the clauses of MoU which are conditional to the terms of MoU.

6) The sale deed was in fact confirmed on 06/01/2016 when Confirmation Deed was executed and the shares were transferred on 04/01/2016 subsequent to execution of sale deed. Hence the title of shares was transferred on 04/01/2016 and not on 24/12/2015 (date of receipt of payment)

7) It will not be out of place to mention that an Indemnity Bond was executed on 06/01/2016.

Hence, the assessee has objection to your proposed proceedings in view of the above.”

(emphasis supplied)

7.2 Relying upon the written submissions extracted in the impugned order, further attention was invited to the documents filed before the ld. PCIT in response to the notice issued u/s 263. Paper Book page 55 to 62 was referred to as it included copy of the MoU dated 28.08.2015 wherein clause 16 exclusively considered by the ld. PCIT available at page 59 was highlighted. Referring to clause 5 at page 59 and clause 17 at page 60, it was submitted that the transaction cannot be said to have been completed as there were still many steps left till the completion of the transaction. In the said backdrop, attention was invited to copy of the Sale Deed dated 20.12.2015 available at page 42 of the Paper Book, copy of the Confirmation Deed dated 06.01.2016 available at pages 43 to 49 was also relied upon as supporting documents for the prayer that the order may be quashed. Attention was also invited to copy of the Indemnity Bond executed on 06.01.2016 available at pages 50 to 54. All these documents, it was submitted, had been made available to the ld. PCIT and all these documents, it was submitted, also stood fully examined by the AO before the passing of the order. It was reiterated that on the basis of these examinations, after raising due queries, the AO passed the order. Accordingly, it was his submission that the impugned order is based on a selective reading of the documents and ignoring the fact that the issue already stood enquired into by the AO. In view of these submissions it was his prayer that the order may be quashed on this issue. Para 7.2.1 1 addressing the said issue it was his prayer that in the absence of a Show Cause Notice, which fact has been verified by the Ld. CIT DR from the record, the impugned order qua the findings/directions given in paras 6 to 6.2 may be held to be non-maintainable. Without prejudice to the above primary argument, it was also his submission that this issue also stood fully enquired into by the A.O. Hence, the impugned order it was his prayer may be quashed in toto.

7.3 In the said backdrop addressing the documents available on record, attention was invited to copy of the Show Cause Notice dated 16.04.2018 issued by the AO available at pages 1,2 and 3. Referring to the specific query raised on this issue which was also flagged in the CASS, it was highlighted the AO required the assessee to explain :

“Proof of investment if any made for claiming exemption u/s 54.”

7.3. 1 Attention was also invited to copy of the reply dated 28.05.20 18 filed before the AO. Inviting attention to page 4 to 5 of the Paper Book alongwith annexures at pages 6 to 31 specific attention was invited to page 5 wherein the following reply of the assessee was given :

“2. Investment made u/s 54F in f-3/16,1st Floor, Vasant Vihar, New Delhi (15% share) on 01.02.2016 of Rs.10725000/- & REC Bond of Rs.41 Lacs in 54EC is enclosed”.

7.3.2 Thus, it was submitted that the facts have been ignored, seen selectively the legal precedent has been discarded. Accordingly, it was his prayer that the 263 order may be quashed.

7.3.3 Reverting back to the documents it was submitted that the reply to the AO was filed alongwith all the relevant documents which consisted of copy of form No. SH-4 for Securities Transfer; List of shareholders as on 31.03.2016 of M/s Kasauli Resorts Pvt.Ltd.; Copy of the Bank account statement maintained with HDFC Bank bearing A/c No.00351000222290 and REC Bond certificate. Copy of notice u/s 142(1) dated 28. 1 1.2018 alongwith Questionnaire issued to the assessee available at pages 35 to 36 was referred to. Specific attention was invited to page 29 which is copy of the bank account statement maintained with HDFC bank. Attention was invited to Paper Book page 30 which would show that the REC Bond was allotted to the assessee on 30.06.20 16. The date of credit of the same, it was pointed out is 28.06.2016. Attention was invited to reply dated 13.08.2018 at page 32, specific para 3 of the same was referred to. A perusal of the same, it was submitted, would show that the specific issue was enquired into by the AO and addressed by the assessee:

With regard to deduction u/s 54 EC beyond the stipulated period of six months it is stated that there is no ambiguity in the same. The sale deed of shares were executed on 30-12-2015. Capital gain bond were purchased on 28-06-2016. The bond certificate was issued on 30-06-2016. The appellant invested in capital gain bond before the expiry of the stipulated period of six months Copy of invoice of bonds of NHAI is enclosed with regard to date of investment on 28-06-2016.

7.4 Maintaining his preliminary objection to the setting aside of the assessment order as an issue on which no Show Cause Notice was issued, ld. AR further submitted that Para 4 of this very document would show that on the second issue also it is a matter of fact that the AO had fully enquired into this aspect. This fact is evident from the reply of the assessee on record. This issue, it was submitted, is even referred to by the AO in the first notice issued to the assessee which has been referred to at page 3 para 3 of the Paper Book on record. The replies of the assessee on the said issue are also available on record, however, reverting back to the first issue on which the ld. PCIT has show caused the assessee which is under consideration referring to page 35 which is again raised through ITBA portal, it was highlighted that the AO specifically required the assessee to give the following information:

“Please refer to assessment proceeding pending in your case for the A.Y. 2016-17. You are requested please furnish detail of shares purchased and sold and exemption claimed u/s 54F and 54EC in respect of long term capital gain.”

7.5 The assessee’s reply to the said notice, it was submitted is available at page 37 dated 23. 1 1.2018. It was submitted that it is after considering the reply contained in these documents that the AO passed the order. It was his submission that these are times wherein the queries are raised through ITBA Portal and the replies are also sent via the portal. Hence, it is not possible for the parties to ignore these facts. The present case based on the facts and evidences available on record, it was submitted, cannot be said to be a case of no enquiry. It was submitted, that further it is also not a case where there is an error in the assessment order pointed out by the ld. PCIT. Infact, on the other hand it is a case wherein the ld. PCIT has for reasons best known to her has chosen to selectively consider part of the documents and ignore the rest of the documents.

7.6 Attention was specifically invited to the following documents stated to be relevant and had been considered by the AO and were filed before the ld. PCIT also. For ready reference, these are scanned from pages 42, 43 and 50 to 54 of the Paper Book filed in the present proceedings :

7.7. Referring to the impugned order, it was his submission that it is evident that these arguments were advanced before the ld. PCIT. Submitting on the basis of these documents, it was argued that before passing the order the AO had fully enquired into on this issue. These submissions, it was submitted, were incorrectly dismissed by the ld. PCIT. For the sake of completeness the relevant findings under challenge is reproduced herein under:-

4. I have carefully considered the submissions filed by the assessee during the proceedings u/s 263 of the Act. The assessee has challenged the assumption of jurisdiction by the undersigned u/s 263 of the Act and objected to the maintainability of the notice u/s 263. In this regard, it would be suffice to say that the presumptions of the assessee are not based upon any empirical observations. The view taken by the undersigned is based upon an independent perception of the assessment record.

The other objection, with regard to the difference of opinion between the Assessing Officer and the Commissioner of Income Tax, the position of law stands substantially altered with the insertion of Explanation 2 in section 263, by the Finance Act, 2015. As the deeming provision in that section has been specifically invoked, the decisions relied upon by the assessee, pertaining to the pre-amended provisions of section 263, would no longer hold good.

5. The facts of the case are the assessee claimed and was allowed exemption of Rs. 41,00,000/- u/s 54EC of the Act in respect of long term capital gain earned on sale of shares held in a company in terms of MOU signed in August 2015 among the concerned parties. From perusal of the MOU dated 26.08.2015, it is seen that there were certain conditions in that MOU and the clause 16 of the same, which is relevant here is reproduced as under:

“on receipt of the full and final consideration by transferers, the transferees will be the 100% share holders in the company and will have 100% management control over the company”

As per clause 16 of the MOU, on receipt of full and final consideration by the transferors, the transferee would have the 100% shareholding and management control over the transferor company. The whole amount of Rs. 1,72,05,600/- was received by you vide cheque dated 24.12.2015.

As per record, it is seen that a sale deed (for the sale of the shares) was executed on 30 December 2015 between the assessee and the company signed by the assessee and the transferee company, however payment in respect of the shareholding was received through cheques on 24.12.2015. Since, the amount pertinent to sale of the shareholding in the company was received on 24 December 2015, therefore as per clause 16 of the MOU, the same was required to be taken as effective date for transfer and accordingly, investment was required to be made on or before 24 June 2016.

5.1 Since, the investment of Rs. 41,00,000/- was made after the expiry of six months from the date of receipts of the sale consideration received on account of sale of shareholding in the company, the exemption claimed by the assessee was required to be disallowed.

5.2 The reply filed by the assessee has been considered. The documents presented by the assessee only refer to the date on which the shares were transferred in the records of the company. This does not decide the date of sale of shares. The date of sale of shares is clearly mentioned in the sale deed dated 30/12/2015 wherein it has been clearly stated that the assessee has received the payment of Rs. 1,72,05,600/-through RTGS on,24/12/2015. Its apparent that the assessee has signed the transfer application form before this date. The assessee was asked to produce these forms but he only filed a copy of the share certificates wherein the date is mentioned as 04-01­2016. This date is the date after which the shares are transferred in the books of the company and is mentioned on te share certificates. The date on which the shares are sold and proceeds are received is the date on which the transfer has taken place. As the assessee had received the sale consideration on 24/12/2015 accordingly the date on which capital gain arose to the assessee is 24/12/2015. The assessee has made investment in REC Bonds on 30/06/2016. Accordingly the same is not eligible for deduction u/s 54EC of the Income Tax Act.The Assessing Officer allowed the deduction without verification and inquiries and without proper application of Law. The order passed by the Assessing Officer is therefore erroneous in so far as it is prejudicial to the interest of Revenue.”

7.8. Accordingly, relying upon the decisions cited in the Paper Book, it was his submission that the impugned order maybe quashed. It was also his submission that the decisions relied upon by the ld. PCIT have no applicability to the facts of the case. On the other hand, the following decisions and the proposition of law therein support the order passed by the Assessing Officer and the prayer of the assessee in the present proceedings. Specific attention was invited to the following case laws :

8. The ld. CIT-DR carrying the Bench through the Show Cause Notice issued by ld. PCIT submitted that in the facts of the present case, the action of the ld. PCIT is fully justified on facts. It was his submission that clause No. 16 relied upon by the ld. PCIT was the relevant clause and it is not a case that clause-5 and 17 relied upon by the assessee have been ignored. It was argued that there is a finding of fact that the total payment was finally received by the assessee on 24. 12.2015. Hence, the period for claiming exemption expired on 24.06.2016. It was submitted that these facts on record are not in dispute. The final payment was received on 24. 12.2015 and the REC Bonds were purchased by the assessee on 30.06.2016 hence the statutory time limit has been exceeded. As a result thereof, the order passed by the AO is erroneous and prejudicial to the interests of the Revenue and hence it was his prayer that it may be upheld.

8.1 Addressing the findings of the ld. PCIT in para 6 and 6.2 challenged by the assessee on the ground that no Show Cause Notice was issued to the assessee on this. The ld. CIT-DR fairly submitted that this fact has been ascertained and it is correct. Addressing the arguments of the ld. AR that this issue was fully enquired into by the AO before passing of the order, the ld. CIT-DR submitted that he would be relying on the impugned order.

8.2 It was also his submission that by the set aside, no prejudice can be said to be caused to the assessee as the assessee has all the opportunity to state whatever the assessee wants to say before the AO. Accordingly, it was his prayer that the impugned order may be upheld.

9. The ld. AR in reply reiterated his submissions stating that on both the issues, the AO had made full and proper enquiries. It was re-iterated that over and above the argument that the issues stood fully enquired into by the AO, it was also his stand that the MoU has been read selectively and not completely by ld. PCIT hence, relying upon the decision cited, the 263, it was submitted, is not maintainable.

9. 1 Addressing the tinkering with the assessment order carried out by the ld. PCIT vide para 6 and 6.2, it was re-iterated that apart from the challenge posed on the ground that this issue also had been fully enquired into by the AO. His preliminary objection remains that this Show Cause Notice was issued to the assessee by the ld. PCIT and hence, the exercise is an arbitrary exercise in violation of principles of natural justice and hence, may be quashed.

10. We have heard the rival submissions and perused the material available on record. The short issue for consideration in the present appeal is whether the order passed by the AO dated 26. 1 1.2018 on the basis of material available on record can be said to be erroneous and prejudicial to the interests of the revenue or not as has been held by the ld. PCIT. On a reading of the impugned order when taken along with the record available, we find that in the facts of the present case, the direction of the Revisionary Authority in setting aside the assessment order dated 26. 12.2018, no case has been made out for exercise of power. The Revisionary Authority has held it to be a case where proper enquiries were not carried out and direction has been given to the AO to pass a fresh order after making necessary enquiries/investigations. We find on a reading of the reasons set out in the impugned order that the interpretation so put by the ld. PCIT on the reading of the MOU is an incorrect and incomplete reading of the documents on record. It is a matter of fact that apart from executing a sale deed there was various other formalities pending which were still required to be fulfilled before the transaction could be said to be completed. Article 5 and Article 17 has specifically been pressed into service on behalf of the assessee. Considering the replies on the queries raised based on the documents relied upon the AO has taken a plausible view on the facts. The Ld. PCIT, on the other hand, has not taken into consideration the full facts and has failed to bring out the error in the order and has also not cared to address the legal position as to why the interpretation given by the AO to the six month period can be said to be incorrect. On the other hand we find that the interpretation given by the ld. PCIT that the six month period should be interpreted on a day to-day basis instead of British Calendar month i.e. last date of the month is unsustainable in view of the legal position addressed earlier in this order. Thus, on a perusal of the material available on record, on the other hand find that the AO before passing of the order has made full and adequate enquiries on these issues. Accordingly, we find that the order passed by the ld. PCIT on this issue cannot be sustained.

10. 1 Addressing the Capital Gain issue which has also been addressed by the Revisionary Authority in the impugned order, we find that it is an arbitrary order wherein the Revisionary Authority has not even cared to issue any Show Cause Notice to the assessee. We further find that on this issue also, the AO as per material available on record had enquired into the issues and thereafter passed the order. Accordingly, we find that the impugned order deserves to be quashed.

11. While so directing, we deem it necessary to observe that the mere fact that the assessment order has been passed in a cryptic manner, by itself cannot make the order erroneous or pre-judicial to the interest of Revenue. If as per record the order is passed after making full and proper enquiries on the issues and after examining of the facts and the view taken is legally sustainable, the assessment order is a valid order in the eyes of law. We further find that merely because there is no discussion on the issues in the assessment order, this fact by itself also cannot lead to the conclusion that the order is an order passed without looking into the relevant facts. We are of the view where on facts evidenced from the nature of queries raised, the reply available thereon, a plausible view is taken by the AO then in such circumstance a vested right is created in favour of the assessee. The Revisionary Authority referring necessarily to the assessment records available has to demonstrate in the order itself that the order passed is an unsustainable order necessitating the resort to the powers vested by Section 263 of the Act. The powers vested u/s 263 of the Act are not to be exercised merely because the powers are so vested. For unsettling a vested right accrued to the assessee by the passing of a valid order it is necessary and incumbent upon the Revisionary Authority to set out the error and the prejudice caused by the assessment order. The Revisionary Authority necessarily needs to see the records as available to the AO. The order cannot be passed on mere whims and fancies.

11.1 We also deem it appropriate to address the arguments advanced by the Ld. CIT DR who has argued that by setting aside no prejudice can be said to be caused to the assessee as the assessee has full right to make his / her submissions before the AO in the next round anyway. We find such an argument is not acceptable. The assessee’s time cannot be taken for granted as the assessee appearing before the tax authorities cannot be made to run around appearing again and again to justify the claim which anyway was allowable and has been allowed in the first round by the AO. The Authorities functioning under the Income Tax Act as Government Authorities are performing State functions for the benefit of the citizens. They no longer can continue to work with the mind set of administering the law applicable to colonials. This style of functioning may have been prevalent unquestioningly during colonial times under a foreign rule, however, it is no longer acceptable in the preset times. By an order passed by the AO after due queries a vested right operates in the favour of the assessee as a valid order in the eyes of law is available., Hence, if by such an order any error or prejudice is caused to the Revenue, the Revisionary Authority, we agree has all the powers of setting aside such orders. However, in order to disturb the vested right of the assessee, the Revisionary authority is duty bound to look at the records available and necessarily needs to set out the error and the prejudice caused by the order sought to be set aside, the attitude that I have the power and I shall exercise it requiring the assessee again to support it claim cannot be accepted.

12. The impugned order on a consideration of the peculiar facts and circumstances of the present case for the reasons herein above is quashed and the appeal of the assessee is allowed.

13. In the result, the appeal of the assessee is allowed. Order pronounced on 06t h December,2022.