Calcutta High Court
Principal Commissioner Of Income ... vs Reeta Lakhmani on 22 November, 2022
OD - 4, 9, 10, 11, 12, 13, 14
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITAT/129/2022
IA NO. GA/1/2022; GA/2/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATA
Versus
REETA LAKHMANI
ITAT/127/2022
IA NO. GA/1/2022, GA/2/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATA
Versus
RITIN LAKHMANI
ITAT/128/2022
IA NO. GA/1/2022, GA/2/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATA
Versus
JAIKISHAN LAKHMANI
ITAT/130/2022
IA NO.GA/1/2022, GA/2/2022
PRINCIPAL COMMISSIONER INCOME TAX 9 KOLOKATA
Versus
PRAVASH KUMAR LAKMANI
ITAT/131/2022
IA NO. GA/1/2022, GA/2/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATA
Versus
RACHIT LAKHMANI
ITAT/132/2022
IA NO. GA/1/2022, GA/2/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATA
Versus
GOPICHAND LAKHMANI
ITAT/133/2022
IA NO. GA/1/2022, GA/2/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 9 KOLKATA
Versus
RAVISH LAKHMANI
2
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA
Dated : NOVEMBER 22, 2022.
Appearance:
Mr. Tilak Mitra, Adv.
...for appellant
Mr. Subhas Agarwal, Adv
...for respondent
The Court :- We have heard learned counsel appearing for the respective parties.
We have perused the affidavit filed in support of the petition and found sufficient cause
has been shown for condonation of delay.
Accordingly, the application is allowed and the delay in filing the appeal is
condoned.
These appeals have been filed by the revenue under Section 260A of the Income
Tax Act, 1961 (the Act) challenging the orders passed by the Income Tax Appellate
Tribunal in various assessment years. The details of the appeal numbers, case number
before the learned Tribunal and the assessment year under consideration are set out in
a tabulated form hereunder :
Sl. No. ITAT No. Date of order Assessment year
1. ITAT 129/2022 13.11.2020 2014-2015
2. ITAT 127/2022 13.11.2020 2014-2015
3. ITAT 128/2022 13.11.2020 2014-2015
4. ITAT 130/2022 13.11.2020 2014-2015
5. ITAT 131/2022 13.11.2020 2014-2015
6. ITAT 132/2022 13.11.2020 2014-2015
7. ITAT 133/2022 13.11.2020 2014-2015
Since the issue involved in all these cases are identical they have been taken
together and are disposed of by this common judgment and order. For the sake of
convenience and with the consent of the learned Advocates for the parties ITAT
/129/2022 is taken as the lead case. The revenue has raised the following substantial
questions of law for consideration:
"i] Whether the learned Tribunal has erred in law and failed to appreciate that the
assessee could not substantiate the genuineness of the transaction to prove that
it had not in dubious share transaction meant to account for undisclosed income
in the garb of Long Term Capital Gain [LTGC] to claim exemption under section
10[38] of the Act ?
ii] Whether the learned Tribunal has erred in law while allowing the assessee's
appeal of claim of exemption under section 10[38] without holding that the official
transaction of purchase and sale of shares of penny stock companies namely
Baviscon Vincom Pvt. Ltd. later amalgamated with Unno Industries Ltd. was
adventure in nature of trade, thus same was to be taxed as business income ?
iii] Whether the learned Tribunal has erred in law in overlooking the documentary
evidence in depth and in light of conduct of the assessee and other surrounding
circumstances in order to see whether the assessee is liable to the provisions of
section 68 or not?"
We have heard Mr. Tilak Mitra, learned standing Counsel for appellant/revenue
and Mr. Pranit Bag, learned Advocate assisted by Mr. S. Mukhopadhyay, learned
Advocate for the respondent.
The contention advanced before us by the revenue is that the assessee could not
establish the genuineness of the transactions to prove that it had not indulged in any
dubious share transactions meant to account for undisclosed income under the garb of
long term capital against (LTCG) to claim exemption under Section 10 (38) of the Act.
On going through the order passed by the learned Tribunal we find that the
learned Tribunal had granted relief to the assessee on two grounds firstly as to whether
the exercise of jurisdiction by the Principal Commissioner of Income Tax under Section
263 was justified and in accordance with law.
This aspect was considered by the learned Tribunal and after going through the
facts of the case it was found that the initiation of the proceedings under Section 263 of
the Act was based on a proposal given by the assessing officer and not at the behest of
the PCIT. It may be true that the PCIT may have information from the assessment file or
through other sources. Nevertheless while exercising powers under Section 263 of the
Act the PCIT has to bear in mind the twin conditions are to be conjointly fulfilled.
Therefore, before exercise of power under Section 263 it is the PCIT who has to apply its
mind to the issue and thereafter record reasons as to how the twin conditions are
satisfied and then issue a show-cause notice to the assessee. In the cases on hand there
is nothing on record to show that such an exercise was done by the PCIT. Therefore,
learned Tribunal after noting several decisions on the subject rendered by the
Coordinate Benches of the Tribunal had allowed the assessee's appeal and set aside the
order passed by the PCIT under Section 263 of the Act. Thereafter, the learned Tribunal
has proceeded to examine the merits of the matter and granted relief. It is the
submission of Mr. Mitra that so far as the merit of the cases are concerned similar issue
was tested by this Court in the case of Principal Commissioner of Income Tax Vs. Swati
Bajaj reported in 2022 SCC online page 1572. Though such may be the issue, as
pointed out earlier the learned Tribunal had granted relief to the assessee on two
grounds the first of which being that the exercise of power under Section 263 of the Act
was not in accordance with law. As could be seen from the substantial questions of law
suggested by the revenue, the revenue has not raised any question on the said finding of
the Tribunal which goes to show that the revenue had reconciled with the reasoning
given by the learned Tribunal in that record. Therefore, a piecemeal challenge to the
order passed by the learned Tribunal on one of the grounds on which relief was granted
to the assessee is not maintainable.
In more or less identical circumstances in the case of Principal Commissioner of
Income Tax, Durgapur Vs. M/s. Sinforte Pvt. Ltd. in ITAT No.104/2019 dated 7.1.2022
the court had dismissed the appeal filed by the revenue on the ground that the PCIT in
order to exercise jurisdiction under section 263 of the Act exercised jurisdiction at the
instance of the assessing officer which is against the provisions of the law. This decision
supports the case of the respondent assessee. Hence, for the above reasons, we are of
the view that the order passed by the learned tribunal on the first ground, namely with
regard to the correctness of the exercise of power under section 263 of the Act has to be
affirmed and, accordingly, the appeal filed by the revenue is dismissed and the
substantial questions of law suggested by the revenue are not required to be decided in
the instant case.
For the reasons set out by us above and, accordingly, the same are left open.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
Pkd/GH.
