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TMI Blog2023 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... It is evident from the record that the AO has made no enquiry to examine the source of investment or the genuineness of the profit earned by the assessee. AO also did not examine the original clients whose codes were alleged to have been modified to show the fictitious profit in the hands of the assessee. The AO merely proceeded to accept the contract notes of 2 brokers submitted by the assessee without appreciating the fact that in the alleged transaction of client code modification these brokers would have been actively involved and their statement cannot be treated as the gospel truth. Thus, in the present case, it cannot be said that the AO has carried out the enquiry/verification that would have been carried out by a prudent officer. The lack of investigation/enquiry by the AO, particularly when the assessment has been reopened on the very same issue and the information was received in this regard from the Investigation Department, would render the assessment order amenable to revision under section 263 of the Act, in the peculiar facts of the present case. This case is also covered under Explanation 2 to section 263 of the Act. Therefore, the assumption of jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only after the assessment proceedings are completed and therefore the assessee did not file the appeal against the impugned order passed under section 263 of the Act within the statutory time limit of 60 days. The assessee has also filed an affidavit sworn by the partner of the assessee firm, stating as under: 1. Principal CIT-28, Mumbai passed an order u/s 263 of Income Tax Act, 1961 dated 20.03.2018 in case of our firm M/s Gautam Investments for A.Y. 2010-11, setting aside the assessment order dated 10.03.2016, passed u/s 143(3) r.ws 147 and issued directions to conduct fresh assessment. 2. We were under the honest impression that appeal against order u/s 263 can be filed only after fresh assessment proceedings are completed and so we did not file the appeal against the order u/s 263 within the statutory time limit of 60 days. 3. We could not receive proper professional guidance at that stage. 4. The fresh assessment proceedings were completed by assessing officer and order u/s 143(3) rows 263 was passed dated 27.12.2018. 5. Hence, this affidavit is being made in support of our application to the Hon'ble Income Tax Appellate Tribunal, Mumbai to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the Department of Investigation that the assessee has made transaction in share/F O and taken benefit illegally by modifying the client code of the person with the client code of its own or vice versa, proceedings under section 147 of the Act were initiated in the case of the assessee and notice dated 31/03/2015, under section 148 of the Act was issued. In response to the notice issued under section 148 of the Act, the assessee filed a letter requesting that its original return filed on 25/09/2010, may be treated as a return filed in response to notice issued under section 148 of the Act. During the reassessment proceedings, the assessee was asked to explain the transaction with Mr. Samta C. Thakkar and Mr. Vipul Deepak Shah. In reply, the assessee submitted that whatever gain the assessee has received has been offered for taxation and in any case, the assessee is a dealer engaged in trading of shares, future and options. Hence the transaction made through client code modification is out of the purview of the assessee, as the stockbroker is authorised to do so and the assessee is not a stockbroker. However, in order to buy peace of mind and to avoid litigation, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources and not to allow set off of same against the earlier years brought forward losses. The learned PCIT also directed the AO to verify the applicability of section 14A read with rule 8D, in the case of assessee, after conducting proper inquiries. Being aggrieved, the assessee is in appeal before us. 10. During the hearing, learned DR explained the facts of the case and vehemently relied upon the impugned order. 11. We have considered the submission of the learned DR and perused the material available on record. In the present case, it is undisputed that reassessment proceedings were initiated under section 147 of the Act on the very same issue of alleged fictitious profits earned by the assessee through the process of client code modification. In the reasons recorded for reopening the assessment, it was alleged that the assessee is a beneficiary of transaction in shares/F O and has taken benefit illegally by modifying the client code of another person with its client code. During the reassessment proceedings, as is evident from the submission dated 24/12/2015, forming part of the paper book on page 11, the assessee merely provided the contract notes of the 2 brokers vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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