9911796707
TMI Blog2020 (11) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... rned on trading in futures and options. The vague and illogical show cause notice, the incorrect interpretation of documents by the Ld. Pr. CIT all show the arbitrary manner in which this extraordinary power to revise the order of the AO has been exercised by the Ld. Pr. CIT. Issue on which Ld. PCIT has exercised her powers u/s. 263 as per the show cause notice, is too trivial, involving income of 2.54 lacs only, to justify exercise of the extraordinary power of revision u/s. 263 of the Act, which has grave and serious consequences, to the prejudice of assesses, of relooking into an already concluded assessment. Since we have found the impugned order of the Ld. Pr. CIT u/s. 263 of the Act, to have been passed in an arbitrary manner, without confronting the assessee with the error in the order of the AO, and based on incorrect appreciation of facts, we have no hesitation in setting aside the order of the Ld. PCIT passed u/s. 263 - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... f income to the tune of ₹ 254500 through process of client code modification without appreciating the fact that the client medication code was done on the same day in order to correct the punching error & which is allowed by the SEBI the regulator of Stock exchanges & also failed to appreciate the quantum of client modification in comparison to quantum of tractions carried by appellant 4. That the Ld. CIT has wrongly held that the profit of appellant was much more than the declared in ITR 5. That the Assessee craves for permission to add, amend, alter or withdraw any grounds of appeal with approval of the hon'ble bench. 4. During the course of hearing before us, the primary contention raised by the Ld. Counsel for the assessee were vis a vis ground Nos. 2 to 4 raised before us. Briefly put the Ld. counsel has challenged the order of the Ld. PCIT on the following counts:- i) That the exercise of powers by the PCIT u/s. 263 of the Act was on identical grounds as on which the Assessing Officer had exercised powers u/s. 147 of the Act, therefore how could the order of the AO be held erroneous. Our attention in this regard was drawn to the reasons recorded by the AO fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of the Ld. Pr. CIT, the order of the AO was erroneous since it had been passed without inquiring on the issue in consideration before him in the proceedings u/s. 147 of the Act, of the assessee having availed contrived losses by resorting to Client Code Modification(CCM). That, despite specific information in his possession regarding details of transaction where Client Code Modification (CCM) had been resorted and quantitative analysis showing that they were not punching errors alone, the AO had accepted the generic reply of the assessee and not cared to enquire as to under what circumstances such huge number of edits were required to be done in the client codes. That the AO even failed to examine the reply received in response to inquiry conducted from Mansukh Securities & Finance Limited, the brokers of the assessee, which revealed much higher net profit earned by the assessee during the year as opposed to that returned by him. The Ld. Pr CIT's findings to this effect at para 3.2 of her order, while dealing with the contention of the assessee before her that complete enquiries had been made by AO, are as under: 3.2 Regarding Contention-(3) The AO had made complete in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes and (ii) family codes. Modifications are not permitted as a rule but only as exception to the rule. Therefore, the assessee cannot simply distance himself from this major allegation by stating that the Client J Modification is the internal matter of the Broker and assessee has not control. The fact that loss is transferred to Client No 31 is to the benefit of the assessee, there is some amount of responsibility on his part to do in the interest of the justice. Assessee being the beneficiary of the impugned loss and the c/aimer of the deduction by way of set off against the other income, or the Broker, who is party to such generation of loss, needs to demonstrate on what basis the client Codes No. SJ17 and M032 are similar to that of the assessee. Are the names are similar? Are these three clients are part of the assessee's family? How the SJ17 or M032 are akin to MO 31? These are the logical questions which are required to be answered by the claimer of the deduction or generator of the impugned losses." The assessee did not care to discharge this onus and despite the taxpayer having failed to discharge this onus the AO passed an order without making inquiries or veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had been misused for tax evasion purposes. • AO has failed to make the relevant enquiries or even examine the information received in response to his 133(6) notices. The assessee is doing business of trading in shares in several capacities ie individual capacity, also as Proprietor of Radiant Investments and as proprietor of Excel Trading. Although the turnover of the Taxpayer is ₹ 2,00,53,83,473/- taxable income is only ₹ 6,37,507/- (return attached as Annexure-3) computation furnished by the taxpayers counsel with letter dated 21.12.2016 (attached as Annexure-4) and the Client Code Modifications (CCM) of transactions carried out are of an amount of ₹ 2,54,500. • The AO conducted an enquiries from Mansukh Securities and Finance Limited and it will be seen that the reply of Mansukh Securities and Finance Limited (Placed at Annexure-5) proves details in the case of Bikramjit Singh as Proprietor Radiant Investments and does not provide detail of actual code no and transactions made as proprietor of Excel Investments. • The AO failed to even examine the reply received in response top 133(6) enquiry from Mansukh Securities and Finance Ltd. Infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .37 lacs. 6.3. But, we find, that the assessee was never confronted with the aforesaid reason for the order of the AO being erroneous on account of having been passed without making inquiry on the issue involved. The show cause notice issued to the assessee in the impugned proceedings dated 19-03-2019, finds no mention of the same as is evident from a bare perusal of the notice, placed before us at P.B. 68-69, the contents of which are under: Sub: Proceedings U/s. 263 of the I.T. Act, 1961-Assessment Year 2009-10-Reg- *** Please refer to the return of income filed by you on 30.09.2009 declaring income of ₹ 6,37,508/- and the assessment order u/s. 147/143(3) passed by the Asst. Commissioner of Income Tax, Circle 3(1) [the Assessing Officer concerned in your case] on 29.12.2016. 1. It is brought to my notice that during F.Y. 2008-09, relevant to A.Y. 2009-10, you have availed contrived losses to the tune of Rs. (-) 2,54,500/-, which ultimately resulted in reduction in your income for the year under consideration. The details of quantum analysis clearly shows that you had contrived to manipulate your profit into losses with loss to the revenue to the tune of ₹ 2,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice for finding the AO's order erroneous, we find is illogical and vague and does not justify the assumption of the extraordinary powers to initiate proceedings for revision of the AO's order u/s. 263 of the Act. The AO not making addition despite having specific information, cannot, by any stretch of logic, make the order passed by him erroneous. Information, howsoever specific, has to be processed as per law; confronted to the assessee, properly investigated and only thereafter after due application of mind a finding arrived thereon. Information alone cannot be the basis of making addition. Further simply mentioning Explanation (2) to section 263 in the show cause notice, which outlines instances where the order of the Assessing Officer is to be deemed to be erroneous, does not meet the requirement in law of confronting the assessee with the error in the order of the AO. Also, we find, that the findings of the Ld. PCIT that the documents on record with the AO showed that the assessee had actually earned huge profits of crores but had returned to tax profits of only 6 lacs, is not based on proper and correct appreciation of facts before her. The Ld. PCIT's ver ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
