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TMI Blog2020 (3) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... oblivious of these facts. There is an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 of the Act which is of wide amplitude. The circumstances clearly existed which demanded enquiry which was not done by the AO while discharging its statutory function. Stock market regulations did not permit a share broker or market intermediary to accept the cash payments against the transactions carried out on the platform of the stock exchange. The client is expected to deal with the share broker only through the banking channel. The case made out on behalf of the assessee that the transactions were carried out on behalf of the unknown clients from whom the cash was received remains totally unsubstantiated. No tangible enquiry has been made by the AO into the circumstances which led to so called arrangement whereby the cash was given by unidentified people to the assessee for doing transactions on their behalf where arrangement itself is violative of regulated procedure. The source of cash has remained unexplained before the AO indeed in the absence of proper verification in this regard. Similarly, no concrete evidence is available for conversion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vimal Desai, A.R. For the Respondent : Shri M. N. Mourya, CIT. D.R. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeals by the assessee are directed against the Pr. Commissioner of Income Tax, Rajkot-2. The relevant particulars are tabulated as under: ITA Nos. Name of assessee AY CIT(A) s order dated AO s penalty order dated AO s order under Section 103/Rjt/17 Shri Hemendra K. Parmar 2010-11 06.02.17 27.03.15 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ) 104/Rjt/17 -Do- 2011-12 -Do- -Do- -Do- 105/Rjt/17 -Do- 2012-13 -Do- -Do- -Do- 2. The grievances raised being common in all three appeals were heard together and disposed of by way of the common order. 3. We shall take up appeal in ITA No.103/Rjt/2017 concerning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of ₹ 76,220/-. 3. A perusal of the records shows that in your bank a/c with Co.- perative Bank of Rajkot, there were cash deposits totaling to ₹ 20,87,000/-. In order to explain the source of cash deposited, you Have stated that there was cash on hand of ₹ 15,46,000/- on 31/03/2009. Besides you received cash from share transactions. As per information available on records, you had carried out share transactions through M/s. Labdhi Finance Corporation. On going through your ledger account in the books of accounts of M/s Labdhi Finance Corporation, no such cash payments by the share broker is noticed. Further it is found that return of income was filed for the A.Y. 2009-10. Even though the AO has accepted source of the cash deposits as genuine, this makes the assessment order erroneous and prejudice to the interest of the revenue. 4. Further perusal of your ledger account with M/s. Labdhi Finance Corporation shows that you have made payments to the share broker on various dates. On going through the ledger account vis-a-vis your bank a/c, it is seen that certain payments aggregating to s.26,86,510/- made through cheques are not appearing in your b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limb of show cause notice, the Pr.CIT found that the ledger account of the assessee in the books of accounts of broker (Labdhi Finance Corporation) shows receipt of several payments from the assessee through cheque aggregating to ₹ 26,85,510/-. The bank account of the assessee however does not correspondingly reflect the payment to the broker. It was alleged that the AO has failed to verify the source of various payments to the broker. 5.6 The Pr.CIT thus cancelled the re-assessment order and directed the AO to make a fresh assessment de novo after making necessary enquiry regarding source of credit entries appearing in the ledger account of the assessee maintained by the broker as well as the source of cash deposited in the bank account of the assessee. While doing so, the Pr.CIT also took note of various decisions relied upon by the assessee and distinguished the same essentially on the premise of lack of appraisal of material placed before the AO and non-application of mind thereon. 6. Aggrieved by the order of the Pr.CIT passed under s.263 of the Act dated 06.02.2017 holding the assessment order passed under s.143(3) r.w.s. 147 of the Act dated 27.03.2015 to be erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who used to pay cash to the assessee to recoup for the losses incurred by the assessee for the transaction carried out on their behalf on the platform of the exchange through Labdhi Finance Corporation. The source of cash deposits in the bank as well as the source of payment to the broker, thus, was fully explainable from the books of accounts, as verified by the AO. It was thus contended that the view taken by the AO on these facts ought not to have been held erroneous by the Pr.CIT. It was further contended that where the assessee has accounted for all the transactions of shares and securities and recorded all the cash received from various sources and deduced taxable income based on such entries, there cannot be said to be any revenue leakage. Hence, no prejudice has been caused to the Revenue and therefore invocation of Section 263 of the Act is not permissible in law. The learned AR for the assessee also referred to the decision of Hon ble Supreme Court in Malabar Industrial Company Ltd. vs. CIT (2000) 243 ITR 83 (SC); CIT vs. Amit Corporation (2012) 21 taxmann.com 64 (Guj) CIT vs. Arvind Jewellers (2002) 290 ITR 689 (Guj) to support the proposition that when a particular v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the interest of Revenue. The twin conditions are required to be satisfied simultaneously. The Pr.CIT in the present case has purported to act in exercise of power under s.263 of the Act and thereby has sought to cancel the assessment order of the AO passed under s.143(3) of the Act. The Pr.CIT essentially observed that the AO in a summary manner has wrongly accepted the source of cash deposits in bank as well as source of payments made to the broker without making any meaningful enquiry in this regard and in the absence of proper enquiry, the order of the AO is erroneous in so far as prejudicial to the interest of the Revenue. 8.1 As pointed out on behalf of the assessee, two pre-requisites must co exist before the designated authority to enable him to exercise the revisional jurisdiction conferred on him namely; the order should be (i) erroneous (ii) the error must be such that it is prejudicial to the interests of the Revenue. However, an erroneous order does not necessarily mean an order with which the Pr.CIT is unable to agree. The AO while passing an order of assessment, performs judicial functions. An order of assessment passed by the AO cannot be interfered only becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and explanations thereon by the assessee clearly indicates its unrealistic nature which would warrant an inquiry from the source persons. The Pr.CIT in discharge of its solemn duty under s.263 of the Act could not remain oblivious of these facts. There is an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 of the Act which is of wide amplitude. The circumstances clearly existed which demanded enquiry which was not done by the AO while discharging its statutory function. 8.3 It is common knowledge that the stock market regulations did not permit a share broker or market intermediary to accept the cash payments against the transactions carried out on the platform of the stock exchange. The client is expected to deal with the share broker only through the banking channel. The case made out on behalf of the assessee that the transactions were carried out on behalf of the unknown clients from whom the cash was received remains totally unsubstantiated. No tangible enquiry has been made by the AO into the circumstances which led to so called arrangement whereby the cash was given by unidentified people to the assessee for doing transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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