Shri Apoorva Patni, Pune V. Jt. CIT,(OSD), Cir.-2, Pune

ITA 582/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56534 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Keywords: Business income; Opportunity of being heard; Speculation loss; Corroborative evidences
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER SL. NO . ITA NO. ASSTT. YEAR APPELLANT RESPONDENT 1. 582/PN/10 2005- 06 SHRI APOORVA PATNI, S.NO 1A, IRANI MARKET COMPOUND, YERAWADA, PUNE JT. COMMISSIONER OF I.T (OSD) CIR.2, PUNE 2. 585/PN/10 2005- 06 MRS SADHANA PATNI, S.NO 1A, IRANI MARKET COMPOUND, YERAWADA, PUNE JT. COMMISSIONER OF I.T (OSD) CIR.2, PUNE 3. 586/PN/10 2005- 06 MRS RUCHI PATNI, S.NO 1A, IRANI MARKET COMPOUND, YERAWADA, PUNE JT. COMMISSIONER OF I.T (OSD) CIR.2, PUNE 4. 588/PN/10 2005- 06 SHRI ARIHANT PATNI, S.NO 1A, IRANI MARKET COMPOUND, YERAWADA, PUNE JT. COMMISSIONER OF I.T (OSD) CIR.2, PUNE APPELLANTS BY : SHRI C H NANIWADEKAR RESPONDENT BY : SHRI HARESHWAR SHARMA DATE OF HEARING : 21.09.2011 DATE OF PRONOUNCEMENT : 21.10.2011 ORDER PER G. S. PANNU, A.M : THE CAPTIONED PROCEEDINGS RELATE TO FOUR ASSESSEES BELONGI NG TO THE SAME FAMILY AND SINCE THE ISSUE INVOLVED IS COMMON, ALL T HE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF A CONSOL IDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. WE SHALL TAKE UP THE CASE OF SHRI APOORVA PATNI VIDE ITA NO 582/PN/10 AS THE LEAD CASE. THIS APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT) DATED 2 29.3.2010 PASSED BY THE COMMISSIONER OF INCOME-TAX-II, PUNE (IN SHORT THE COMMISSIONER) SETTING ASIDE THE ASSESSMENT ORDER DATED 11 .04.2007 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT FOR T HE ASSESSMENT YEAR 2005-06 AND DIRECTING THE ASSESSING OFFICER TO FRAME A F RESH ASSESSMENT AFTER MAKING DETAILED ENQUIRIES ON VARIOUS POINTS AS DIRECTED BY THE COMMISSIONER. 3. IN THIS CASE, ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT DETE RMINING THE TOTAL INCOME OF THE ASSESSEE AT RS 9,79,58,390/- AS AGAINST RE TURNED INCOME OF RS 9,79,58,390/-. ON EXAMINATION OF RECORD, THE COMMISSIO NER NOTICED THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE BECAUSE, ACCORDI NG TO HIM, THE GAINS OF RS 3,38,40,379/- PLUS RS 1,19,77,765/- EMANATING FROM T RADING IN SHARES OUGHT TO HAVE BEEN ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE OPINION OF THE COMMISSIONER, THE TR ANSACTIONS RESULTING IN THE GAINS HAD ALL THE INGREDIENTS OF A BUSINESS AS INCLUSIVEL Y DEFINED IN SUB-SECTION (13) OF SECTION 2 OF THE ACT AND THE FAILURE OF THE ASSESSING OFFICER TO TAKE COGNIZANCE OF THE SAID FACTS AND CONSEQUENTLY TO ASCERTAI N THE APPROPRIATE HEAD OF INCOME UNDER WHICH THE PROFIT DERIVED FROM SALE OF SHARES SHOULD HAVE BEEN TAXED, RENDERED THE ASSESSMENT ERRONEOUS INSOFAR AS PREJU DICIAL TO THE INTERESTS OF REVENUE. THE COMMISSIONER ACCORDINGLY ISSUED A NOTICE U NDER SECTION 263 OF THE ACT REQUIRING THE ASSESSEE TO EXPLAIN ITS POSITION. TH E ASSESSEE APPEARED AND FILED DETAILED WRITTEN SUBMISSIONS. AFTER HEARING THE ASSESSEE AS WELL AS CONSIDERING THE WRITTEN SUBMISSIONS, THE COMMISSIONER HELD THAT THE ASSESSING OFFICER FAILED TO EXAMINE THE VARIOUS FACTUAL AS WELL AS LEGAL ASPECTS RELATING TO ASSESSEES TRANSACTIONS IN SHARES, ETC. ACCORDING TO THE CO MMISSIONER, THE ASSESSING OFFICER FAILED TO EXAMINE THE AGREEMENT BETWEE N THE ASSESSEE AND THE PORTFOLIO MANAGEMENT SERVICE (PMS IN SHORT) PRO VIDERS AND THAT THE ASSESSING OFFICER OUGHT TO HAVE SEEN WHETHER THE PMS PROV IDER ACTED IN THE CAPACITY OF AN AGENT OR LIKE A MUTUAL FUND. HE FURTHER OBSERVED THAT IF THE PMS 3 PROVIDER HAS ACTED IN THE CAPACITY OF AN AGENT, THEN T HE ASSESSING OFFICER SHOULD HAVE EXAMINED THE MANNER IN WHICH THE BUSINESS OF PMS P ROVIDER WAS CONDUCTED. IN THE VIEW OF THE COMMISSIONER, THE ASSESSING O FFICER FAILED TO EXAMINE THE SHARE TRANSACTIONS FROM THE POINT OF: A. VOLUME OF TRANSACTIONS, B. FREQUENCY OF TRANSACTIONS, C. IN WHOSE DEMAT ACCOUNT THE SHARES WERE PURCHASED? D. WHETHER THE INTENTION OF THE ASSESSEE WAS TO HOLD TH E SHARES AS INVESTMENT E. HOLDING PERIOD OF SHARES, F. WHETHER THE SHARES WERE SOLD BEFORE EARNING DIVIDE NDS, G. WHETHER THE ASSESSEE HAS REPURCHASED SAME SHARES AFTER SELLING THEM, I.E. HE HAS INVESTED IN THE SAME SCRIPS AFTER BOOKIN G PROFITS, H. DIFFERENCE BETWEEN THE INVESTMENT IN MUTUAL FUNDS A ND PMS, I. WHETHER THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE PMS PROVIDER SPEAK OF THE BUSINESS RELATIONSHIP WITH REGARD T O THE INVESTMENTS AN THE SHARE OF PROFITS/ J. WHETHER THERE WAS A COMPONENT OF RISK INVOLVED IN T HE SHARE TRANSACTIONS? THE COMMISSIONER FURTHER OBSERVED THAT THE ASSESSING OFF ICER HAS ALSO NOT MADE ANY EXAMINATION WHATSOEVER IN RELATION TO INVEST MENTS IN MUTUAL FUNDS AND THAT THE ASSESSING OFFICER FAILED TO APPLY THE TEST S OF LEGAL PRONOUNCEMENTS WITH REGARD TO THE ISSUE OF DECIDING WHETHER SUCH INCOME WAS ASSESSABLE AS BUSINESS INCOME OR CAPITAL GAINS. THE COMMISSIONER FINALLY CONCLUDED AS UNDER: 13. THE ASSESSING OFFICER HAS NOT EXAMINED THE ABOV E ISSUES WHICH ARE VITAL TO DECIDE AS TO WHETHER THE TRANSACTIONS CARRIED OUT BY THE A SSESSEE THROUGH THE PMS PROVIDER AND OTHERWISE ARE IN THE NATURE OF INVESTMENTS OR BUSIN ESS. FOR ENABLING SUCH EXAMINATIONS, THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 IS H EREBY REMITTED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL GIVE THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD AND DECIDE THE ISSUES AFRESH, AS PER LAW. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT HA S ASSAILED THE ORDER OF THE COMMISSIONER ON THE GROUND THAT THE INVOKING OF SEC TION 263 OF THE ACT IN THE PRESENT CASE WAS NOT JUSTIFIED. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE IS AN INDIVIDUAL WHO HAD DECLARED INCOME FROM HOU SE PROPERTY, CAPITAL GAINS ON SHARE INVESTMENTS AND ALSO BUSINESS INCOME FROM TRA DING OF SHARES, APART FROM EARNING DIVIDEND AND INTEREST INCOME UNDER THE HEAD INCOME FROM 4 OTHER SOURCES. THE LEARNED COUNSEL POINTED OUT THAT AL ONG WITH THE RETURN OF INCOME, ASSESSEE HAD ANNEXED DETAILED STATEMENT OF THE L ONG TERM AND SHORT TERM CAPITAL GAINS EARNED BY THE ASSESSEE BY UTILIZING T HE PORTFOLIO MANAGEMENT SERVICES OF DSP MERRILL LYNCH FUND MANAGERS LTD. AND KOT AK SECURITIES LTD. IT WAS POINTED OUT THAT THE RETURN OF INCOME WAS ACCOMPANIE D BY THE PERSONAL INCOME & EXPENDITURE ACCOUNT, CAPITAL ACCOUNT AND BALANC E SHEET. APART THEREFROM, THE ASSESSEE WAS CARRYING ON SHARE TRADING BU SINESS IN A PROPRIETARY CONCERN WHOSE BALANCE SHEET AND PROFIT & LOSS ACCOUNT WAS SEPA RATELY ENCLOSED. IT WAS THUS CONTENDED THAT THE ASSESSEE HAD DECLAR ED CAPITAL GAIN ON SHARE DEALINGS SEPARATELY, WHEREAS THE TRADING IN SHARES CARRIED OUT IN THE PROPRIETARY CONCERN WAS DECLARED AS BUSINESS INCOME. THE L EARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER IN PARA 3 OF THE A SSESSMENT ORDER HAS NOTED THE DISTINCTION, INASMUCH AS THE ENGAGEMENT OF THE ASSESS EE IN THE BUSINESS OF TRADING IN SHARES AND ALSO DERIVING INCOME FROM LONG TE RM CAPITAL GAINS HAS BEEN NOTED. THE LEARNED COUNSEL ALSO POINTED OUT THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD RAISED QUERIES VIDE LETTER DATED 15.3.2007 WHEREBY THE ASSESSEE WAS REQUIRED TO INTER-ALIA, FURNI SH MONTH-WISE PRINT OUT OF MUTUAL FUND ACCOUNT, DETAILS OF MUTUAL FUND REINVESTE D WITH SUPPORTING EVIDENCE, BOOKS OF ACCOUNT IN RESPECT OF THE BUSINESS OF TRADING IN S HARES, ETC. IN THIS MANNER, THE LEARNED COUNSEL HAS POINTED OUT THAT THE ASSESSING OFFICER WAS AWARE OF THE DEALING IN SHARES CARRIED OUT BY THE ASSESSE E, WHEREIN ONE SEGMENT WAS TREATED AS A TRADING ACTIVITY IN THE PROPRIETARY CO NCERN, WHEREAS THE OTHER ACTIVITY WHICH WAS CARRIED OUT THROUGH THE PORTFOLIO MA NAGERS WAS DECLARED AS CAPITAL GAINS. THE LEARNED COUNSEL ALSO POINTED OUT THA T IN THE SUBSEQUENT ASSESSMENT YEAR OF 2006-07, THE ASSESSING OFFICER IN AN ASSESSME NT MADE UNDER SECTION 143(3) OF THE ACT DATED 12.2.2008 HAD T REATED THE INCOME FROM PORTFOLIO MANAGEMENT SERVICES AS BUSINESS INCOME AND THAT T HE SAME HAS NOT BEEN UPHELD BY THE COMMISSIONER OF INCOME-TAX (APPEAL S) IN ITS ORDER DATED 28.12.2010. IT IS SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS), AFTER 5 ANALYZING THE FACTUAL ASPECTS OF THE PORTFOLIO MANAGEM ENT SERVICES ENGAGED BY THE ASSESSEE, HELD THAT IT WAS A DISCRETIONARY PORTFOLIO MANAGEMENT SERVICES WHERE THE PMS PROVIDER HAD GOT ABSOLUTE INDEPENDENC E IN TAKING DAY TO DAY DECISIONS SO FAR AS INVESTMENT IN SHARES, ETC ARE CONCERNED. THE COMMISSIONER OF INCOME-TAX (APPEALS) REFERRED TO THE DECISION OF TH E ITAT PUNE BENCH IN THE CASE OF ARA TRADING & INVESTMENTS PVT. LTD. (ITA NO 49 9/PN/08 DATED 31.8.2009 FOR ASSESSMENT YEAR 2004-05) AND HELD THAT ACTIVITY OF TRANSACTIONS IN SHARES/MUTUAL FUNDS BY ENGAGING A PMS PROVIDER CARRIED ON BY THE ASSESSEE WAS AN INVESTMENT ACTIVITY AND THE RESULTANT GAIN WAS A SSESSABLE UNDER THE HEAD CAPITAL GAINS. IT WAS, THEREFORE CONTENDED THAT IN THI S VIEW OF THE MATTER THE ASSESSMENT ORDER DATED 11.4.2007 IN THE INSTANT YEAR CAN NOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, BECAUSE THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW. MOREOVER, THE LEAR NED COUNSEL SUBMITTED THAT THE COMMISSIONER HAS MERELY HELD THAT THE ASSESSING OFFICE R HAD FAILED TO MAKE ENQUIRY IN A PARTICULAR MANNER AND SUCH AN OBJECTION IS NOT VALID FOR THE PURPOSES OF SECTION 263 OF THE ACT. IN THIS REGARD, IT WAS SUBMITT ED THAT THERE IS A DIFFERENCE BETWEEN LACK OF ENQUIRY VIS--VIS INADEQUATE ENQUIRY AN D IT IS ONLY IN THE CASE OF FORMER, INVOKING OF SECTION 263 IS JUSTIFIED. IN THE PR ESENT CASE, AS PER THE COMMISSIONER IT IS A CASE OF INADEQUATE ENQUIRY AND ACCOR DING TO THE ASSESSEE, THE SAME IS NOT A GROUND FOR INVOKING OF SECTION 263 A ND IN THIS REGARD, RELIANCE HAS BEEN PLACED ON JUDGMENT OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT V. DESIGN & AUTOMATION ENGINEERS (BOMBAY) P. LTD. 323 ITR 632 (BOM). IN NUT-SHELL, IT IS THE CASE OF THE ASSESSEE THAT IT IS ONLY A CASE OF DIFFERENCE OF PERCEPTION BETWEEN THE COMMISSIONER AND THE ASSESSING OFFI CER ON THE ISSUE OF SHARE TRANSACTIONS WHICH CANNOT BE A GROUND FOR INVOKING SE CTION 263 OF THE ACT. 5. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENT ATIVE, APPEARING FOR THE REVENUE, HAS VEHEMENTLY ARGUED THAT THE COMMISSION ER HAS ESTABLISHED IN DETAIL THAT NO ENQUIRY HAS BEEN CONDUCTED BY THE ASSESSI NG OFFICER WITH REGARD TO THE MANNER OF EARNING OF CAPITAL GAINS THROUGH THE P MS PROVIDERS AND, THEREFORE, 6 IT IS A CASE WHERE ASSESSEES CLAIM FOR ASSESSMENT OF THE INCOME FROM SHARES AS CAPITAL GAIN HAS BEEN ACCEPTED WITHOUT APPLICATION OF MI ND. THUS, THE ASSESSMENT ORDER DATED 11.4.2007 PASSED BY THE ASSESSING OF FICER HAS BEEN RIGHTLY HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. THE LEARNED DEPARTM ENTAL REPRESENTATIVE REFERRED TO A JUDGMENT OF THE HONBLE PUNJAB & HARY ANA HIGH COURT IN THE CASE OF CIT VS. ASSAM TEA HOUSE (2010) 48 DTR (P&H) 112 TO SUBM IT THAT IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSING OFFICER HAD CARRIED OUT VERIFICATION ON CERTAIN ISSUES, THE INVOKING OF SECTION 263 OF THE ACT BY THE COMMISSIONER TO SET ASIDE SUCH ASSESSMENT WAS JUSTIFIED, EVEN IF THE COMMISSIONER HAD NOT COME TO A FIRM CONCLUSION REGARDIN G EVASION OF TAX. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO.LTD. (2000) 243 ITR 83 ( SC). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS..SECT ION 263 OF THE ACT EMPOWERS A COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY O RDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJU DICIAL TO THE INTERESTS OF THE REVENUE, HE MAY AFTER GIVING THE ASSESSEE AN OPPORT UNITY OF BEING HEARD AND MAKING SUCH ENQUIRIES HE MAY DEEM FIT, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHAN CING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRE SH ASSESSMENT. IN THE PRESENT CASE, THE COMMISSIONER HAS HELD THE ASSESSMENT ORDER DATED 11.4.2007 AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE AND THE SAME HAS BEEN SET ASIDE AND DIRECTED TO BE MADE AFRESH ON TH REE ISSUES, NAMELY, (A) TREATMENT OF GAINS IN RESPECT OF INVESTMENT THROUGH PM S AS BUSINESS INCOME; (B) TREATMENT OF LOSS ON ACCOUNT OF DERIVATIVE TRANSACTIONS AS SPECULATIVE LOSS, AND, (C) DISALLOWANCE UNDER SECTION 40A OF THE ACT. AT THE TIM E OF HEARING, THE APPELLANT HAS CONTESTED BEFORE US THE INVOCATION OF SE CTION 263 BY THE COMMISSIONER ONLY ON A SINGLE ISSUE RELATING TO THE GAIN S IN RESPECT OF 7 INVESTMENT THROUGH PMS. THE ASSESSING OFFICER HAD ACCEPT ED THE RETURN OF INCOME FILED BY THE ASSESSEE QUA THE TRANSACTIONS IN SHARE S UNDERTAKEN THROUGH ENGAGEMENT OF A PMS PROVIDER AS ASSESSABLE UNDER THE H EAD CAPITAL GAINS. THE COMMISSIONER, IN AN ELABORATELY WRITTEN ORDER, HA S MADE OUT A CASE THAT THE ASSESSING OFFICER HAS NOT EXAMINED VARIOUS FACTUAL AND LEG AL ASPECTS RELATING TO SUCH ACTIVITY WHICH WAS CRITICAL TO CONCLUDE AS TO WHETHER SUCH INCOME WAS ASSESSABLE AS BUSINESS INCOME OR AS CAPITAL GAINS. THE COM MISSIONER HAS REFERRED TO THE CBDT CIRCULARS IN PARA 8.3, SOME OF TH E RELEVANT CASE LAWS IN PARA 8.2, AND THEREAFTER IN PARA 8.4 HE HAS ENUMERA TED VARIOUS TESTS TO DECIDE AS TO WHETHER THE IMPUGNED ACTIVITY CONSTITUTED BUSINESS ACTI VITY OR INVESTMENT ACTIVITY. CONSEQUENTLY, IN PARAS 12 AND 13 OF THE ORDE R, THE COMMISSIONER HAS POINTED OUT THE NON-EXAMINATION OF THE IMPUGNED ACT IVITY IN THE CONTEXT OF THE AFORESAID TESTS. QUITE CLEARLY, THE CASE MADE OUT BY THE COMMISSIONER IS THAT THE ASSESSING OFFICER HAS FAILED TO APPLY HIS MIND TO THE LEG AL AND FACTUAL ASPECTS BEFORE DETERMINING AS TO WHETHER THE IMPUGNED ACTIVI TY CONSTITUTED BUSINESS OR AN INVESTMENT ACTIVITY. IN THIS BACKGROUND, WE HAVE EXAM INED THE QUERY LETTER DATED 15.3.2007 ISSUED BY THE ASSESSING OFFICER AND WHICH HAS BEEN REFERRED BY THE APPELLANT BEFORE US. WE HAVE ALSO PERUSED THE ASSESSM ENT ORDER AND ALSO THE REPLY OF THE ASSESSEE TO THE ASSESSING OFFICER ON 21. 3.2007 WHICH HAS BEEN PLACED BEFORE US. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSI NG OFFICER DULY APPLIED HIS MIND, THOUGH THE ENQUIRY WAS NOT CONDUCTED IN THE MANNER STATED BY THE COMMISSIONER AND IN ANY CASE, AS PER THE APPELLANT , IT IS NOT A CASE OF LACK OF ENQUIRY. IN OUR CONSIDERED OPINION, AFTER HAVING PERU SED THE ENTIRE MATERIAL ON RECORD, IT CLEARLY EMERGES THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND IN THE MANNER IN WHICH THE ASSESSEE HAS EARNED INCOME FROM ITS PMS DEALINGS. UNDOUBTEDLY, THE ASSESSEE HAS MADE INVESTMENT THROUGH TH E PMS PROVIDER IN TERMS OF WRITTEN AGREEMENTS, COPIES OF WHICH HAVE BEEN P LACED ON RECORD. THERE IS NOTHING BROUGHT ON RECORD TO SAY THAT THE ASSESSING OF FICER WAS AWARE OF SUCH AGREEMENTS, MUCH LESS THE TERMS AND CONDITIONS OF SUCH AGR EEMENTS SO AS TO 8 APPRECIATE APPROPRIATELY THE NATURE AND THE MANNER O F EARNING OF INCOME BY THE ASSESSEE THROUGH THE PMS PROVIDER. THEREFORE, FACTUALLY SPEAKING, THE COMMISSIONER IS CORRECT IN ASSERTING THAT THE ASSESSING OFFICE R FAILED TO APPLY HIS MIND TO THE FACTS AND RELATED LEGAL ASPECTS OF THE IMPUG NED ACTIVITY AND, THEREFORE, SUCH AN APPROACH OF THE ASSESSING OFFICER, IN OUR VIEW, CLEARLY FALLS WITHIN THE MEANING OF EXPRESSION ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE , AS CONTAINED IN SECTION 263 OF THE ACT. AN ASSESSMENT ORDER PASSED WITHOUT APPLICATION OF MIND CERTAINLY FALL S WITHIN THE PURVIEW OF SECTION 263 OF THE ACT IN TERMS OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA). IN SO FAR AS THE PLEA SET UP BY THE ASSESSEE THAT IT IS A CASE OF INADEQUATE ENQUIRY AND NOT LACK OF ENQUIRY IS CONCERNED, IN OUR VIEW, THE FACTUAL ASPECTS CLEARLY POINT OUT THAT IT IS A CASE WHERE THE ASSESSING OFFICER HAS FAILED TO MAKE ENQUIRIES, AND IT IS A CASE OF LACK OF APPLICATION OF MIND, WHICH CLEARLY JUSTIFIES INVOKING OF SECTION 263 OF THE ACT. 7. THE OTHER ASPECT ARGUED IS ON THE BASIS OF THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DATED 28.12.2010 FOR THE ASSE SSMENT YEAR 2006-07 WHEREIN ASSESSEES STAND HAS BEEN UPHELD. ON THIS BASIS, IT IS ARGUED THAT IT IS A CASE OF A MERE DIFFERENCE OF PERCEPTION BETWEEN THE ASSE SSING OFFICER AND THE COMMISSIONER AND IN ANY CASE, A POSSIBLE VIEW HAS BEEN TAKE N BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 11.4.2007. IN OU R CONSIDERED OPINION, HAVING REGARD TO THE FACTUAL SITUATION IN THE INSTANT CASE, THE AFORESAID ARGUMENT OF THE ASSESSEE HAS TO FAIL. AS NOTED EARLIER, IN THIS CASE, THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE RELEVANT FACTS THEREBY LEADI NG TO DETERMINATION OF AN ASSESSMENT WITHOUT PROPER APPLICATION OF MIND ON THE ISSUE OF SHARE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE THROUGH THE SERVICES OF A PMS. O NCE IT IS ESTABLISHED THAT THE RETURN OF INCOME ON A PARTICULA R ASPECT HAS BEEN ACCEPTED WITHOUT APPLICATION OF MIND, THE SAME WOULD TANTAMOUN T TO BE AN ASSESSMENT WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT AND THE SAME CANNOT BE DEFENDED ON THE PLEA 9 THAT IT WAS A POSSIBLE VIEW. RATHER, IT IS A CASE WHERE T HE VIEW CONTAINED IN THE RETURN OF INCOME HAS BEEN ACCEPTED BY DEFAULT AND NOT A CASE WHERE A CONSCIOUS VIEW HAS BEEN TAKEN BY THE ASSESSING OFFICER AFTER DUE APP LICATION OF MIND ON THE RELEVANT FACTUAL AND LEGAL ASPECTS OF THE MATTER. THEREFORE, THE IMPUGNED ORDER OF THE COMMISSIONER INVOKING SECTION 263 OF THE ACT ON THE IMPUGNED ISSUE CANNOT BE DEFEATED ON THE AFORESAID PLEA SET UP BY T HE ASSESSEE. 8. IN THE RESULT, WE UPHOLD THE ORDER OF THE COMMISSIO NER QUA THE PLEA RAISED BY THE ASSESSEE AND ACCORDINGLY THE ASSESSEE HAS TO FAIL IN THIS APPEAL. 9. BEFORE PARTING, WE MAY ADD THAT OUR DECISIO N TO REJECT THE PLEAS OF THE ASSESSEE IS NO REFLECTION ON THE MERITS OF THE CONTROVERSY, WHICH IS LIABLE TO BE ADJUDICATED IN THE APPROPRIATE PROCEEDINGS AS PER LAW. 10. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. 11. THE FACTS AND SUBMISSIONS OF RIVAL SIDES BEING SIMILAR IN THE OTHER CAPTIONED APPEALS, VIZ. ITA NOS 585/PN/10, 586/PN/10 & 588/PN/10 IN THE CASES OF MRS SADHANA PATNI, MRS RUCHI PATNI & SHRI ARIHANT P ATNI RESPECTIVELY, OUR DECISION GIVEN IN THE CASE OF SHRI APOORVA PATNI, VIDE ITA NO 582/PN/10, WILL APPLY MUTATIS MUTANDIS TO THOSE APPEALS ALSO. ON THE PARITY OF REASONING, THEREFORE, ITA NOS. 585/PN/10, 586/PN/10 & 588/PN/10 ARE ALSO DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF OCTOBER, 2011. SD/- SD/- (I C SUDHIR) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 21 ST OCTOBER, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. APPELLANT ` 2. RESPONDENT 3. THE CIT-II PUNE` 4. THE D.R, A BENCH, PUNE 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE