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2016 (10) TMI 598 - ITAT MUMBAI

2016 (10) TMI 598 - ITAT MUMBAI - TMI - Validity of revision order u/s 263 - Held that:- PCIT had issued the show cause notice u/s 263 even without examining the assessment records. Such type of practice is contrary to transparent and fair working and not appreciated in the eyes of law. The assumption of jurisdiction u/s 263 is based upon a valid show cause notice issued u/s 263. The entire premise of the Ld. Principal CIT in issuing show cause notice u/s 263 for holding the impugned assessment .....

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the AO and the assessment order was framed after examining the exhaustive details and evidences, the recourse available for the Ld. PCIT for revision u/s 263 to was to hold that the loss has been wrongly allowed by the AO and view taken by the AO was not at all a plausible view in the eyes of law. Unless such a finding is recorded by Ld. PCIT, especially where exhaustive exercise has been done by the AO, the order of the AO in allowing the impugned loss could not have been held to be erroneous. .....

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eja, AM This appeal has been filed by the assessee against the order passed u/s 263 by the Principal Commissioner of Income-tax-9, Mumbai [hereinafter called Ld. PCIT] dt 20-03-2015 for A.Y. 2011-12 on the following grounds: YOUR APPELLANT CRAVES LEAVE TO RAISE FOLLOWING GROUNDS OF APPEAL WITHOUT PREJUDICE TO ONE ANOTHER & THEREFORE, YOUR APPELLANT PRAYS THAT THEY MAY BE DECIDED INDEPENDENTLY. 1] Order u/s. 263 of Income Tax Act, 1961 On the facts and in the circumstances and in law and in t .....

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evidence furnished during assessment assessment proceedings by the appellant. 3 ] PRAYERS (i) On the facts and circumstances of the case the appellant submits that the order passed by the Learned Pri. CIT is bad in law as the said order is passed against the principles of natural justice. 2. The brief background in this case is that original assessment order was passed by the Assessing Officer u/s 143(3) dt 28-03-2014 making few disallowances / additions and assessing the income at ₹ 35,5 .....

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led appeal before the Tribunal. 3. During the course of hearing, it has been submitted by the Ld. Counsel that detailed enquiries were made by the Assessing Officer for which exhaustive replies were submitted to the Assessing Officer from time to time. It appears that Ld. PCIT has not examined the assessment record before issuing show cause notice u/s 263. It was submitted that the show cause notice was issued challenging the allowance of operational expenses of ₹ 8.79 crores and interest .....

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d that at many places it has been mentioned in the show cause notice that no enquiry was made by the Assessing Officer and no details were called for whereas the fact is that detailed enquiries were made, replies were submitted and details and documentary evidences were submitted which were duly examined by the Assessing Officer before passing the impugned assessment order. Our attention has been drawn on the exhaustive paper book filed by the assessee containing various documentary evidences su .....

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a, the Ld. CIT-DR supported the order passed by the Ld. PCIT. However, he could not rebut the arguments made by the Ld. Counsel of the assessee that various evidences were already held on the record which appear to have skipped the attention of the Ld. PCIT while issuing show cause notice u/s 263. He thus concluded his arguments by supporting the order of Ld. PCIT. 5. We have gone through the order passed by the Ld. PCIT as well as details and documentary evidences shown to us by both parties. I .....

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d the arguments of the assessee and dropped this ground. But with respect to the other ground, i.e. challenging the allowability of operational loss of ₹ 8.79 crores by the Assessing Officer without making proper verification, though the assessee made exhaustive reply before the Ld. PCIT demonstrating that overwhelming details and evidences were furnished before the Assessing Officer and Assessing Officer had duly examined the same and applied his mind before allowing the same while framin .....

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hat the AO has failed to make proper enquiries so as to assess the correct income with regard to the following points: 2) The computation of total income filed along with the return of income you have shown net loss from Business/Profession of ₹ 11,21,87,728/- taken from the profit and loss account for the relevant accounting year. Further, on perusal of the profit and loss account for the relevant assessment year to arrive at the said loss of ₹ 11,21,87,728 you have shown operationa .....

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vity. However, on perusal of the assessment records it is noticed that neither any details nor any explanation to arrive at the said loss of ₹ 8,79,80,162/- is either filed by the assessee or called for by the Assessing Officer. No examination of the books of account, transaction accounts of the share trading activity carried out by the assessee viz-a-viz the D-mat accounts of the assessee is carried out by the Assessing Officer during the course of assessment proceedings. In other words, .....

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ssing Officer is prima- fade appear to be erroneous and prejudicial to the interest of revenue within the meaning of the provisions of section 263 of the Act. ii) It is further noticed that you have claimed interest or financial expenses of ₹ 3,96,78,563/- as per sch.8 of the profit and loss account which is also accordingly allowed by the Assessing Officer without any verification so as to ascertain whether the loan / funds raised on which interest paid is utilized entirely for the purpos .....

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ugh authorized representative, you may show cause in writing on or before the said date which will be considered before any such order u/s. 263 of the Act is passed. (Emphasis supplied in bold letters) 6. Thus, from the above, it is noted that the Ld. PCIT was prompted to assume jurisdiction u/s 263 by issuing aforesaid show cause notice on the ground that with respect to loss of ₹ 8.79 crores, neither any details nor any explanations were furnished by the assessee. It was also alleged tha .....

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furnished to the Assessing Officer. Our attention was also drawn upon reply submitted to the Assessing Officer dt 11-11-2013 and item No.9 of the said reply which reads as follows: 9. Point No.18 Purchases and sales of shares and stock of shares, Refer Annexure- D . For expenses, operative expenses [It is loss on sale of shares] and administration expenses, monthly ledger copies are enclosed herewith PAN No. where applicable will be given shortly. Refer Annexure - E . 7. Similarly, at page 66 of .....

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res, rate, amount and resultant profit / loss arising on each transaction individually. The assessee vide its reply dated 3-12-2013 provided further explanation to the doubts arising in the mind of the Assessing Officer; relevant part of the said reply is reproduced hereunder for the sake of ready reference: Respected Sir, In the above matter, we have been instructed by our client to state and we enclosed herein following evidences, explanations and submissions as required by your goodself. In c .....

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00 plus pages in total 7 sets). We therefore request you to give us opportunity to marked and matched with AIR details in person before your goodself or otherwise give reasonable time to reconcile all AIR details at the earliest opportunity. We hope you will consider our above request by affording one more opportunity before finalizing the said Assessment. 8. Further, vide its reply dated 24-1-2014, the assessee again enclosed details of purchases of shares including all opening split shares wit .....

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z. M/s Fortune Equity Brokers India Ltd and DEMAT settlement account with M/s Fortune Credit Capital Ltd. In addition to that, the assessee also placed on record before the Assessing Officer its accounts in the books of M/s Fortune Equity Brokers India Ltd (depository participant of Central Depository Services India Ltd) showing excessive details and break up of all the transactions. Further, assessee vide its letter dated 15-3-2014 to the Assessing Officer submitted scrip-wise stock of shares. .....

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n by the ITO-1(1)(2). The facts of the case are as under: We have last submitted details before your goodself on 24-1-2014 and request your goodself to grant us time for two weeks in order prepare the details required by your goodself as per your Questionnaire dt.27-12-2013. For your information we have submitted details of purchase and sales on our personal appearance on 20-1- 2014 and 24-1-2014 with detail explaining the ownership of shares, source of funds, demat statement and along with comp .....

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ownership of shares, source of funds, demat statement and alongwith complete supporting documents and sales confirmation along with quantity and value, with broker s confirmation, borrower s confirmation and demat statement with detail explaining the ownership of shares, source of funds along with complete supporting documents were submitted to your goodself on 24-1-2014 personally with value of Ras.54=26 crore in value along with the documentary evidence. With reference to your point no.10 as .....

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before us that the assessee had submitted exhaustive details and documentary evidences to the AO with a view to justify its operational loss from share trading. All the documentary evidences and details were also in the knowledge of Addl.CIT and thus, these were examined not only by the AO but also by the Addl.CIT. Under these circumstances, we fail to understand as to on what basis the Ld. PCIT mentioned in show cause notice that no details and documentary evidences were furnished before the AO .....

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