Sh. Bikramjit Singh, Chandigarh V. Pr. CIT-2, Chandigarh

ITA 878/CHANDI/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4040 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-09-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C CHANDRAKANTA
• Assessee Lawyers: SHRIAJAY KUMAR JAIN
• Keywords: Principle of natural justice; Reassessment proceedings; Futures and options
• Section: 143(3); 133(6); 2(A); 13; 147; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A,CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.878/CHD/2019 / ASSESSMENT YEAR : 2009-10 SHRI BIKRAMJEET SINGH, SCO 33, SECTOR 20-D, CHANDIGARH THE PCIT-2, CHANDIGARH ./PAN NO: AEEPS9345E / APPELLANT /RESPONDENT HEARING THROUGH VIDEO CONFERENCING /ASSESSEE BY : SHRIAJAY KUMAR JAIN, CA ! / REVENUE BY : SMT. C CHANDRAKANTA, CIT ' #$ /DATE OF HEARING : 15.09.2020 %&'($ / DATE OF PRONOUNCEMENT : 28 .10.2020 ') / ORDER PERANNAPURNA GUPTA, AM: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 31.3.2019 OF THE PR. COMMISSIONER OF INC OME TAX -2, CHANDIGARH [HEREINAFTER REFERRED TO AS PCIT] PASSED U/S 263 O F THE INCOME TAX ACT,1961(IN SHORT REFERRED TO AS ACT) EXERCISING HER REVISION JURISDICTION. 2. BRIEFLY STATED, THE ASSESSEE IS A TRADER IN SHAR ES. FOR THE IMPUGNED YEAR, REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT WERE INITI ATED BY THE ASSESSING OFFICER (AO) ON THE ASSESSEE ON THE BASIS OF INFORMA TION IN HIS POSSESSION ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 2 FROM ASSTT. DIT (INVESTIGATION) UNIT 1(3). AHMEDABAD , THAT THE ASSESSEE HAD AVAILED CONTRIVED LOSSES IN SHARE TRADING BY RESORT ING TO CLIENT CODE MODIFICATION, TO THE TUNE OF RS.2,54,500/-, WHICH H AD RESULTED IN REDUCTION OF ASSESSEES INCOME TO THE SAID EXTENT. IN THE ASSESSME NT ORDER ULTIMATELY PASSED BY THE ASSESSING OFFICER , NO ADDITION WAS MADE ON THIS ACCOUNT. THE LD. PCIT FOUND THE ORDER PRIMA FACIE ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE SINCE ,AS PER HER, EVEN THOU GH THE QUANTUM ANALYSIS CLEARLY SHOWED MANIPULATION OF PROFITS BY THE ASSESSEE, YET THE AO MADE NO ADDITION. ACCORDINGLY EXERCISING HER REVISIONARY POWERS U/S 263 OF THE ACT, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AND TH EREAFTER , AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE LD. PR.CI T HELD THE ORDER PASSED BY THE AO U/S 147 OF THE ACT TO BE ERRONEOUS SO AS TO CA USE PREJUDICE TO REVENUE AND ACCORDINGLY CANCELLED THE ASSESSMENT, D IRECTING FRESH ASSESSMENT ON THE ISSUE . 3. THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE US RAIS ING THE FOLLOWING GROUNDS CHALLENGING THE ORDER OF THE LD. PCIT. 1. THAT THE LD. PR. COMMISSIONER OF INCOME TAX-2, CHAN DIGARH HAS WRONGLY PASSED ORDER UNDER SECTION 263 OF INCOME TA X ACT WITHOUT JURISDICTION OVER ASSESSING OFFICER WHO FRAMED THE ASSESSMENT U /S 143(3) R.W.S. 147 OF INCOME TAX ACT. 2. THAT THE ASSESSMENT ORDER HAVING BEEN PASSED BY THE ASSESSING OFFICER AFTER MAKING DUE ENQUIRY & DUE APPLICATION OF MIND AND TAKING INTO CONSIDERATION THE VARIOUS REPLIES, MATERIAL ON RECO RD AND BOOKS OF ACCOUNT, THE ACTION RESTORED TO BY THE PR. CIT-2 CHANDIGARH FOR IMPOSING HER OPINION IS UNWARRANTED AND UNCALLED FOR. 3. THAT ORDER OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX, CHANDIGARH WHICH WARRANTS INITIATION OF PROCEEDINGS UNDER SECT ION 263 OF THE ACT WAS BASED SUSPICION & CONJECTURE & WITHOUT ANY MATERIAL EVIDENCE ON RECORDS FOR REDUCTION OF INCOME TO THE TUNE OF RS 254500 THROUG H 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 PU NCHING ERROR & WHICH IS ALLOWED BY THE SEBI THE REGULATOR OF STOCK EXCHANGE S & ALSO FAILED TO APPRECIATE THE QUANTUM OF CLIENT MODIFICATION IN CO MPARISON 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 ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 3 5. THAT THE ASSESSEE CRAVES FOR PERMISSION TO ADD, AME ND, ALTER OR WITHDRAW ANY GROUNDS OF APPEAL WITH APPROVAL OF THE HON'BLE BENCH. 4. DURING THE COURSE OF HEARING BEFORE US, THE PRIMAR Y CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE WERE VIS A VIS G ROUND 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 REAS ONS RECORDED BY THE AO FOR REOPENING THE CASE U/S 147 OF THE ACT PLACED AT PAPER BOOK PAGE NO.29 AND THE SHOW CAUSE NOTICE ISSUED BY THE LD. P R.CIT U/S 263 OF THE ACT DATED 19-03-2019 PLACED AT PAPER BOOK PAGE NO.68-69 II) THAT THE ASSESSING OFFICER HAD PASSED ORDER MAKIN G NO ADDITION AFTER MAKING DUE INQUIRY & DUE APPLICATION OF MIND, TAKI NG INTO CONSIDERATION THE VARIOUS REPLIES FILED BY THE ASSESSEE ,MATERIAL ON RECORD AND BOOKS OF ACCOUNTS. OUR ATTENTION WAS DRAWN TO DOCUMENTS AT SL. NO. 3 TO 6 OF PAPER BOOK WHICH ARE AS UNDER: SL. NO. PARTICULARS PAGE NO. 3. COPY OF SHOW CAUSE NOTICE DATED 09/12/2016 ISSUED BY ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3(1), CHANDIGARH 30-40 4. REPLY DATED 21/12/2016 ISSUED TO SHOW CAUSE NOTICE DATED 09/12/2016 41-46 5. COPY OF LETTER DATED 27/10/2016 FOR CALLING OF INFORMATION GIVEN BY ACIT, CIRCLE 3(1), CHANDIGARH TO MANSUKH SECURITIES & FINANCE LIMITED, CHANDIGARH 47-47 6. COPY OF REPLY DATED 03/11/2016 BY MANSUKH SECURITIES & FINANCE LIMITED TO LETTER DATED 27/10/2016 FOR CALLING OF INFORMATION GIVEN BY ACIT , CIRCLE 3(1), CHANDIGARH. 48-64 THAT LD. PCIT BY EXERCISING HER JURISDICTION U/S 263 ON THE VERY SAME ISSUE WAS TRYING TO IMPOSE HER VIEW FOR WHICH PURPOSE T HE SAID POWERS U/S 263 COULD NOT BE EXERCISED. III) THAT IN ANY CASE, EVEN ON MERITS, THE ISSUE DID NOT CALL FOR ANY ADDITION SINCE THE CLIENT CODE MODIFICATION WAS AN INADVERTENT PUNCHING ERROR WHICH HAD OCCURRED IN FEW CASES OUT OF THE IN NUMERABLE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE AND THE ERROR WAS WITH IN THE PERMISSIBLE NORMAL ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 4 RANGE OF PUNCHING ERRORS. OUR ATTENTION WAS DRAWN T O THE REPLY FILED BEFORE THE LD. PR.CIT PLACED AT P.B PAGE NO .70-92 IN THIS REGARD. 5. THE LD. DR ON THE OTHER HAND, HAS RELIED ON THE ORDER OF THE LD. PCIT. 6. WE HAVE HEARD THE PARTIES. WE HAVE ALSO CAREFULL Y GONE THROUGH THE ORDER OF THE LD. PCIT AND THE VARIOUS DOCUMENTS PLAC ED BEFORE US IN THE FORM OF PAPER BOOK. ON GOING THROUGH ALL THE ABOVE WE FI ND THAT THE LD. PR.CIT HAS EXERCISED THE EXTRAORDINARY POWERS OF RE VISION OF ORDER PASSED BY AO, U/S 263 OF THE ACT, IN AN UTMOST ARBITRARY MANNE R, WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE AND WITHOUT DUE APPLICA TION OF MIND ON THE FACTS AND EVIDENCES BEFORE HER. THE ORDER, THEREFORE, DESE RVES TO BE QUASHED. THE REASON FOR ARRIVING AT THE AFORESTATED FINDINGS IS DISCUSSED HEREUNDER. 6.1 AS PER THE FINDINGS OF THE LD. PR.CIT, THE ORDE R OF THE AO WAS ERRONEOUS SINCE IT HAD BEEN PASSED WITHOUT INQUIRING ON THE IS SUE IN CONSIDERATION BEFORE HIM IN THE PROCEEDINGS U/S 147 OF THE ACT , OF T HE ASSESSEE HAVING AVAILED CONTRIVED LOSSES BY RESORTING TO CLIENT CODE MODIFICATION(CCM). THAT, DESPITE SPECIFIC INFORMATION IN HIS POSSESSION R EGARDING DETAILS OF TRANSACTION WHERE CLIENT CODE MODIFICATION (CCM) HA D BEEN RESORTED AND QUANTITATIVE ANALYSIS SHOWING THAT THEY WERE NOT PUNC HING ERRORS ALONE, THE AO HAD ACCEPTED THE GENERIC REPLY OF THE ASSESSEE AN D NOT CARED TO ENQUIRE AS TO UNDER WHAT CIRCUMSTANCES SUCH HUGE NU MBER 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 FR OM MANSUKH SECURITIES & FINANCE LIMITED, THE BROKERS OF THE ASSESSEE, WHIC H REVEALED MUCH HIGHER NET PROFIT EARNED BY THE ASSESSEE DURING THE YEAR AS OPPOSED TO THAT RETURNED BY HIM. THE LD.PR CITS FINDINGS TO THIS E FFECT AT PARA 3.2 OF HER ORDER, WHILE DEALING WITH THE CONTENTION OF THE ASSESSEE B EFORE HER THAT COMPLETE ENQUIRIES HAD BEEN MADE BY AO ,ARE AS UNDER: ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 5 3.2 REGARDING CONTENTION-(3) THE AO HAD MADE COMPLETE INQUIRES AND DID NOT ACCEP T THE REPLY OF THE ASSESSEE ON FACE VALUE ALONE BUT COMPLETED THE ASSE SSMENT AFTER RECEIPT OF INFORMATION FROM THE BROKER, FILING OF CONFIRMATION S FROM THE PARTIES AND DISCUSSION WITH THE ASSESSEE AFTER WHICH HE DID NOT FIND ANY A DVERSE INFORMATION. NEITHER REPLY OF THE ASSESSEE ON ASSESSMENT FOLDER ( A GENERIC LETTER IN 4 PARAS IE TAXPAYERS REPLY TO SHOWCASE IS PLACED AT ANNEXURE-2 ) NOR THE ONE FILED DURING 263 PROCEEDINGS HAS TOUCHED UPON THE INCRIMINATING EVIDENCE CONFRONTED BY AO VIDE SHOWCAUSE DATED 9-12-2016 NOR HAS THE TAXPA YER DISCHARGED ITS ONUS IN RESPONSE TO THIS OFFICE SHOW CAUSE LETTER NO 6244 D ATED 19-03-2019 TO SHOW CAUSE WHY THE ASSESSMENT FRAMED VIDE ORDER DATED 29-12-20 16 SHOULD NOT BE CANCELLED. RATHER THE ASSESSEE HAS SIMPLY OFFERED A GENERIC EXPLANATION WHICH IS AN ARTICULATE CORROBORATION OF THE INFERENCE THAT T HE ASSESSEE HAS NOTHING TO OFFER IN TERMS OF AN EXPLANATION. AS THE ASSESSEE HAS BRO UGHT DOWN HIS TAXABLE INCOME BY SHIFTING OUT PROFITS AND SHIFTING IN THE LOSSES, THE ONUS LAY CLEARLY LAY ON THE ASSESSEE TO JUSTIFY THE SAME AS THE DEPARTMENT HAD ALREADY CONFRONTED THE INCRIMINATING EVIDENCE AND THE ORDER HAD BEEN PASSE D BY AO AT RETURNED INCOME WITHOUT MAKING INQUIRIES OR VERIFICATION WHI CH SHOULD HAVE BEEN MADE. THE ASSESSEE CANNOT MERELY SHRUG AWAY FROM ITS RESP ONSIBILITY TO EXPLAIN THE CLEAR CUT DATA WHICH SHOWS THAT THE PROFITS OF THE ASSESS EE WERE SHIFTED OUT. IN SUPPORT OF THIS PROPOSITION RELATING TO THE RESPONSIBILITY OF THE ASSESSEE, AN EXTRACT FROM THE DECISION OF HON'BLE ITAT (MUMBAI) IN THE CASE OF AS HOK GOYAL (HUF) VS ACIT IN INCOME TAX 4172/MUM-2012 IS REPRODUCED HEREUNDER: 'REGARDING CLIENT CODE MODIFICATION (IN SHORT CCM' ) RELATED ALLEGATIONS OF THE AO, WE FIND THAT THE NSE HAS A DEFINITE POLICY IN T HIS REGARD WE FIND THE AO MADE ENQUIRIES WITH THE NSE, WHO REPLIED TO THE AO VIDE THE LETTER DATED 3.11.2010. THE SAME IS EXTRACTED AT PARA 4.1 OF THE ASSESSMENT ORD ER. ON PERUSAL OF THE SAME, WE 14 FIND THAT THE LANGUAGE USED IN THE LETTER VAR IES WITH THE ONE USED AND NARRATED IN THE ACTUAL POLICY ADOPTED BY THE NSE ON THIS CCM. AS PER THE POLICY, THE MODIFICATION IF ANY IS NOT PERMITTED ACROSS THE BOARD AND THE SAME IS ALLOWED WITH RESTRICTIONS. ONLY THE FOLLOWING TYPES OF MODI FICATIONS ARE PERMITTED BY NSE NAMELY, I) SIMILARITY OF NAMES AND CODE NUMBERS - N ON REPETITIVE ONES AND (II) FAMILY CODES. MODIFICATIONS ARE NOT PERMITTED AS A RULE BUT ONLY AS EXCEPTION TO THE RULE. THEREFORE, THE ASSESSEE CANNOT SIMPLY DIS TANCE HIMSELF FROM THIS MAJOR ALLEGATION BY STATING THAT THE CLIENT J MODIFICATIO N 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 W AY OF SET OFF AGAINST THE OTHER INCOME, OR THE BROKER, WHO IS PARTY TO SUCH G ENERATION 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 THE SE 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.' ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 6 THE ASSESSEE DID NOT CARE TO DISCHARGE THIS ONUS AN D DESPITE THE TAXPAYER HAVING FAILED TO DISCHARGE THIS ONUS THE AO PASSED AN ORDE R WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE AND THE SA ID ORDER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO REVENUE. THE AO DID INDEED ACCEPT THE REPLY OF TAXPAYER ON F ACE VALUE AND DISREGARDED THE EVIDENCE ON RECORD. IT WAS INCUMBENT UPON THE A O TO HAVE MADE ENQUIRIES OR VERIFICATION HE NEITHER EXAMINED THE BOOKS OR FI NAL ACCOUNTS EVEN THOUGH HE HAD CALLED FOR THE SAME, IN FACT AUDITED ACCOUNTS A RE NOT PLACED ON THE ASSESSMENT FOLDER AND WHILE THE COMPUTATION- MENTIO NS PROFIT FROM RADIANT INVESTMENTS AND EXCEL TRADING TO BE AS PER PROFIT A ND LOSS ACCOUNT BUT THE SAID PROFIT AND LOSS ACCOUNT IS NOWHERE ON THE ASSESSMEN T RECORD OR INDEED EVEN FILED IN 263 PROCEEDINGS. NOT ONLY HAS THE TAXPAYER FAILED TO DISCHARGE ITS R ESPONSIBILITY TO EXPLAIN THE CLEAR CUT DATA BUT THERE IS NOTHING ON RECORD TO SHOW HOW THE AO ACCEPTED THE GENERIC REPLY OF THE ASSESSEE PARTICULARLY WHEN THE CLIENT CODE MODIFICATION CLEARLY INDICATED BY THE NUMBER OF EDITS THAT THESE WERE NOT GENUINE ERRORS. AS PER GUIDANCE IN THE RULING MENTIONED SUPRA ABOVE IN PARA 8 THE ASSESSEE SHOULD HAVE BEEN ASKED BY THE AO TO DEMONSTRATE ON WHAT BASIS THE CLIENT CODE CE OF THE ASSESSE W AS SIMILAR TO THE CODES OF THE MODIFIED CLIENTS. NONE OF THE DOCUMENTS PLACED ON THE FILE INDICATE H OW HE ACCEPTED THE EXPLANATION OF THE ASSESSEE IN THE FACT OF CONTRARY EVIDENCE PROVIDED TO HIM IN THE DATA SHARED BY THE INVESTIGATION WING. THE ASSESSEE IN ITS REPLY FILED BEFORE A.O. IN TWO PAGES PLACED AT ANNEXURE-2 HAS PROVIDED ONLY A GENERIC REPLY AND THE A.O. WITHOUT MAKING PROPER ENQUIRY HAS ACCEPTED THE SAME. EVEN IN 263 PROCEEDINGS BEFORE THE UNDERSIGNED DATE D 25-03-2019, REPRODUCED SUPRA TAXPAYER HAS STATED THAT CCM WAS CARRIED OUT AS A CORRECTION OF INADVERTENT ERRORS ONLY AND NOT FOR ANY SHIFTING OF PROFIT AND THAT THESE CORRECTIONS ARE NEGLIGIBLE IN NUMBERS AND INSIGNIFICANT IN AMOU NT INVOLVED AS COMPARED TO THE CRORES OF TRANSACTIONS CARRIED OUT BY THE COMPA NY DURING THE YEAR UNDER CONSIDERATION AND THAT AS PER COMMODITY EXCHANGE, I F CLIENT CODE MODIFICATION IS UPTO 1% OF THE TOTAL ORDERS, THERE IS NO PENALTY . IT IS SEEN THAT EVEN THOUGH NO SPECIFIC REPLY ON THE ISSUE WAS FILED BY THE ASSESS EE, IN A CASE WHERE THE ISSUE WAS NOT WHETHER CCM AS PER EXTANT REGULATIONS WAS ALLOW ED OR NOT, BUT IF THIS FACILITY OF CCM HAD BEEN USED FOR CORRECTING GENUINE PUNCHIN G ERRORS OR HAD BEEN MISUSED FOR TAX EVASION PURPOSES. AO HAS FAILED TO MAKE THE RELEVANT ENQUIRIES OR EVE N EXAMINE THE INFORMATION RECEIVED IN RESPONSE TO HIS 133(6) NOTICES. THE ASS ESSEE IS DOING BUSINESS OF TRADING IN SHARES IN SEVERAL CAPACITIES IE INDIVIDU AL CAPACITY, ALSO AS PROPRIETOR OF RADIANT INVESTMENTS AND AS PROPRIETOR OF EXCEL TRAD ING. ALTHOUGH THE TURNOVER OF THE TAXPAYER IS RS. 2005383473/- TAXABLE INCOME IS ONLY RS. 6,37,507/- (RETURN ATTACHED AS ANNEXURE-3) COMPUTATION FURNISHED BY TH E TAXPAYERS COUNSEL WITH LETTER DATED 21.12.2016 (ATTACHED AS ANNEXURE-4) AN D THE CLIENT CODE MODIFICATIONS (CCM) OF TRANSACTIONS CARRIED OUT ARE OF AN AMOUNT OF RS 2,54,500. THE AO CONDUCTED AN ENQUIRIES FROM MANSUKH SECURITI ES AND FINANCE LIMITED AND IT WILL BE SEEN THAT THE REPLY OF MANSUKH SECUR ITIES AND FINANCE LIMITED (PLACED AT ANNEXURE-5) PROVES DETAILS IN THE CASE O F BIKRAMJIT SINGH AS PROPRIETOR ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 7 RADIANT INVESTMENTS AND DOES NOT PROVIDE DETAIL OF ACTUAL CODE NO AND TRANSACTIONS MADE AS PROPRIETOR OF EXCEL INVESTMENT S. THE AO FAILED TO EVEN EXAMINE THE REPLY RECEIVED IN RESPONSE TOP 133(6) ENQUIRY FROM MANSUKH SECURITIES AND FINANCE LTD . INFORMATI ON FURNISHED BY MANSUKH SECURITIES AND FINANCE LIMITED SHOWS NET PROFIT OF THE FOLLOWING ORDER: CLIENT CODE NAME NET PROFIT/LOSS ANNEXURE SRI01 RADIANT INVESTMENT (ILFS) - 39280. 23 1 SRI01 RADIANT INVESTMENT 1158692.40 1 TO 12,13 QBS05 BIKRAMJEET SINGH TRADING 561539.75 1 ART01 RADIANT INVESTMENT 8326291.84 4 TOTAL 10046523.99 - 39280.23 PERUSAL OF THE ABOVE TABLE WILL SHOW THAT INCOME HA S BEEN ACCEPTED AT RETURNED INCOME OF 637507 BY AO WITHOUT EVEN EXAMINING THE P AND L ACCOUNT UNDERLYING THE DECLARED PROFITS FOR TRADING, BOOKS OR EVEN BAS IC AUDITED ACCOUNTS PARTICULARLY WHEN THE INFORMATION COLLECTED U/S 133 (6) SHOWED THAT NET PROFITS AS A RESULT OF TRADING DONE BY THE TAXPAYER WAS MUCH MOR E (10046523.99-39280.23 ) THAN REFLECTED IN ITS INCOME TAX RETURN AT 6,37,508 . INFORMATION PERTAINING TO ABOVE CLIENT CODES IS PLA CED ON THE ASSESSMENT FOLDER, HOWEVER THE CLIENT CODES MENTIONED IN THE COVERING LETTER ARE STFRI01, SRI01, STFBS05 WHICH DO NOT TALLY WITH INFORMATION SUPPLIE D BEING SR101,QBS05, OR THAT AT ANNEXURE TO COMPUTATION BEING SR101, QR101, QB505. INCOME BEING ACCEPTED AT RETURNED UNDERASSESSED WITHOUT EVEN EXAMINING EV EN BASIC AUDITED ACCOUNTS PARTICULARLY WHEN THE INFORMATION COLLECTED U/S 133 (6) SHOWED THAT NET PROFITS AS A RESULT OF TRADING DONE BY THE TAXPAYER WAS MUCH MOR E THAN REFLECTED IN ITS INCOME TAX RETURN. 6.2 BASED ON THESE FINDINGS ,SHE HAD CONCLUDED THAT THE ORDER OF THE AO WAS ERRONEOUS , AT PAGE 14 OF HER ORDER AS UNDER: THE FACTS DISCUSSED SUPRA WHEN PLACED IN THE PERSPE CTIVE OF THE ABOVE JURISPRUDENCE AND PROVISIONS OF SECTION 263, INTER- ALIA INCLUDING EXPLANATION 2(A) MAKE IT EVIDENT THAT THE QUERIES RAISED DURING REVI SION PROCEEDING U/S 263 OF THE IT. ACT, 1961 REMAIN UNVERIFIED AND THAT THE ORDER WAS PASSED BY AO WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE AND HAS RESULTED IN A CLAIM BEING ALLOWED WITHOUT ENQUIRING INTO IT. PERUSAL OF THE ABOVE TABLE WILL SHOW THAT INCOME HAS BEEN ACCEPTED AT RE TURNED INCOME OF 637507 BY AO WITHOUT EVEN EXAMINING THE P AND L ACCOUNT UN DERLYING THE DECLARED PROFITS FOR TRADING, BOOKS OR EVEN BASIC AUDITED AC COUNTS PARTICULARLY WHEN THE INFORMATION COLLECTED U/S 133(6) SHOWED THAT NET PR OFITS AS A RESULT OF TRADING DONE BY THE TAXPAYER WAS MUCH MORE (10046523.99-392 80.23 ) THAN REFLECTED IN ITS INCOME TAX RETURN AT 6.37 LACS. ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 8 6.3 BUT ,WE FIND, THAT THE ASSESSEE WAS NEVER CONFR ONTED WITH THE AFORESAID REASON FOR THE ORDER OF THE AO BEING ERRONEOUS ON AC COUNT OF HAVING BEEN PASSED WITHOUT MAKING INQUIRY ON THE ISSUE INVOLVED. THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE IN THE IMPUGNED PROCEEDINGS DA TED 19-03-2019,FINDS NO MENTION OF THE SAME AS IS EVIDENT FROM A BARE PE RUSAL OF THE NOTICE, PLACED BEFORE US AT P.B 68-69, THE CONTENTS OF WHIC H ARE UNDER: SUB: PROCEEDINGS U/S 263 OF THE I.T. ACT, 1961-ASSE SSMENT YEAR 2009-10-REG- *** PLEASE REFER TO THE RETURN OF INCOME FILED BY YOU O N 30.09.2009 DECLARING INCOME OF RS. 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 O F 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 RS. 2,54,500/-. HOWEVER, ASSESSMENT U/S 143(3) R.W.S 14 7 OF THE INCOME ACT, 1961 WAS COMPLETED WITHOUT MAKING ANY ADDITION. 2. IN VIEW OF THE FACTS STATED ABOVE, IT APPEARS THAT THE ASSESSMENT FRAMED U/S 147/143(3) OF THE INCOME TAX ACT ON 29.12.2016 FOR A.Y. 2009-10 IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REV ENUE IN TERMS OF ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE I N TERMS OF PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 1961 INCLUDING EXPLANATI ON 2 INSERTED BY THE FINANCE ACT, 2015 W.E.F 01.06.2015. YOU ARE, THEREFORE, REQ UESTED TO SHOW CAUSE AS TO WHY ASSESSMENT FRAMED VIDE ASSESSMENT ORDER DATED 2 9.12.2016 U/S 147/143(3) OF THE INCOME TAX ACT, 1961 FOR A.Y. 2009-10 SHOULD NOT BE CANCELLED BY INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOM E TAX ACT, 1961. 3. YOUR CASE IS FIXED FOR HEARING BEFORE THE UNDERSIGN ED ON 22.03.2019 AT 11.00 A.M. IN CASE OF NON-COMPLIANCE, IT WOULD BE P RESUMED THAT YOU HAVE NOTHING TO SAY IN THIS REGARD AND ORDER U/S 263 WOU LD BE PASSED ON MERITS ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6.4 AS IS EVIDENT FROM THE ABOVE, THE SHOW CAUSE NOT ICE MENTIONS THAT IT WAS TO THE NOTICE OF THE LD. PR. CIT THE ASSESSEE H AD AVAILED CONTRIVED LOSSES, HOWEVER DESPITE SPECIFIC INFORMATION TO THIS EFFECT NO ADDITION WAS MADE BY THE A.O. THIS, BY NO MEANS CAN BE READ AS THE A.O. HAV ING MADE NO INQUIRY ON THE ISSUE, FOR WHICH REASON THE LD. PR. CIT HAS HELD THE ORDER PASSED BY THE A.O. TO BE ERRONEOUS. ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 9 6.5 FURTHER THE LD. PR.CIT ,HAS BASED HER CONCLUSIO N OF THE AO NOT HAVING CONDUCTED ENQUIRY ,BY POINTING OUT, BESIDES OTHER THING S, THAT THE AO HAD NOT LOOKED INTO THE STATEMENTS OF THE TRANSACTIONS CONDUCTED BY THE ASSESSEE SUBMITTED BY THE BROKERS DURING ASSESSMENT PROC EEDINGS, WHICH REVEALED CLEARLY THAT THE ASSESSE HAD EARNED HUGE PR OFITS BUT HAD ACTUALLY RETURNED TO TAX LESS PROFITS. BUT THE ASSESSEE, WE F IND, WAS NEVER PUT TO NOTICE REGARDING THIS. THE SHOW CAUSE NOTICE FINDS NO MENTI ON OF THE SAME. CLEARLY ,THE ASSESSEE, WAS NOT CONFRONTED BY THE LD. PR.CIT WITH THE REASON FOR FINDING THE AOS ORDER ERRONEOUS, THUS DENYING HIM FAIR OPPO RTUNITY OF REBUTTAL. THE ENTIRE EXERCISE OF THE LD. PR.CIT OF REVISION OF AO S ORDER U/S 263 OF THE ACT, IS, THEREFORE ,WE HOLD ,IN GROSS VIOLATION OF THE PRINC IPLES OF NATURAL JUSTICE . 6.6 MOREOVER THE REASON MENTIONED IN THE SHOW CAUSE NOTICE FOR FINDING THE AOS ORDER ERRONEOUS, WE FIND IS ILLOGICAL AND VAGUE AND DOES NOT JUSTIFY THE ASSUMPTION OF THE EXTRAORDINARY POWERS TO INITI ATE PROCEEDINGS FOR REVISION OF THE AOS ORDER U/S 263 OF THE ACT. THE AO NOT MAKING ADDITION DESPITE HAVING SPECIFIC INFORMATION, CANNOT ,BY ANY ST RETCH OF LOGIC, MAKE THE ORDER PASSED BY HIM ERRONEOUS. INFORMATION, HOW SOEVER SPECIFIC, HAS TO BE PROCESSED AS PER LAW; CONFRONTED TO THE ASSESSEE, PR OPERLY INVESTIGATED AND ONLY THEREAFTER AFTER DUE APPLICATION OF MIND A FI NDING ARRIVED THEREON. INFORMATION ALONE CANNOT BE THE BASIS OF MAKING ADDITI ON. FURTHER SIMPLY MENTIONING EXPLANATION (2) TO SECTION 263 IN THE SHO W CAUSE NOTICE, WHICH OUTLINES INSTANCES WHERE THE ORDER OF THE ASSESSI NG 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 E ARNED 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. PCITS VERSION IS BASED ON THE NET PROFIT FIGURES EXTRACTED BY HER FROM THE D ETAILS OF THE ASSESSEES TRANSACTIONS IN VARIOUS ACCOUNTS ,SUBMITTED BY HIS BROK ER, MANSUKH SECURITIES ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 10 AND FINANCE LTD., SHOWING NET PROFITS AS UNDER, AS R EPRODUCED AT PAGE 9 OF THE ORDER:- CLIENT NAME NET PROFIT / LOSS ANNEXURE SR101 RADIANT INVESTMENT (ILFS) -39280.23 SR101 RADIANT INVESTMENT 1158692.40 1 TO 12, 13 QBS05 BIKARAMJEET SINGH TRADING 561539.75 1 ART01 RADIANT INVESTMENT 8326291,84 4 TOTAL 10046523.99- 39280.23 7. ON GOING THROUGH THE STATEMENTS OF THE BROKER RELA TING TO THE SAID CLIENT CODES, FILED BEFORE US AT P.B 48-64 , WE FIN D THAT THE PROFIT ON ACCOUNT OF CLIENT CODE MODIFICATION IN ACCOUNT CODE SR 101 OF RADIANT INVESTMENT ,A PROPRIETORSHIP CONCERN OF THE ASSESSEE CARRYING OUT SH ARE TRADING TRANSACTION, SHOWING NET PROFIT OF 1158692.40 FROM ANNEXURE 1 TO 1 2, 13 IN THE TABLE ABOVE, ACTUALLY HAS BEEN TAKEN FROM THE MARK TO MARKET (MTM) ADJUSTMENTS ON TRADING IN FUTURE AND OPTIONS, BEING THE TOTAL OF FU TURE MTM 77,88,893 + OPTION MTM 37,98,019. FIRSTLY, WE FIND, THAT THE FIGU RE HAS BEEN INCORRECTLY TAKEN AS RS. 11,58,692.40 INSTEAD OF RS.1,15,86,91 2.40. FURTHER THE MTM MARKINGS ARE NOT THE PROFITS EARNED BY THE ASSESSEE O N ACCOUNT OF TRADING IN FUTURES AND OPTIONS, BUT REPRESENT THE DAILY SETTLE MENT OF THE UNSOLD TRADES AT THEIR PREVAILING MARKET PRICE. THEREFORE, THE LD. PCIT WE FIND HAS NEITHER PICKED UP THE CORRECT FIGURES FROM THE STATEMENT OF AC COUNTS SUBMITTED BY THE BROKERS, NOR UNDERSTOOD WHAT THE FIGURES REPRESE NTED AND ACCORDINGLY ARRIVED AT AN INCORRECT FINDING THAT THE ASSESSEE H AD NOT REFLECTED TRUE PROFITS, RUNNING IN CRORES, EARNED ON TRADING IN FUTURES AND OPTIONS. 7.1 THE VAGUE AND ILLOGICAL SHOW CAUSE NOTICE, THE INCORRECT INTERPRETATION OF DOCUMENTS BY THE LD. PR.CIT ALL SHOW THE ARBRITRAR Y MANNER IN WHICH THIS EXTRAORDINARY POWER TO REVISE THE ORDER OF THE AO H AS BEEN EXERCISED BY THE LD. PR.CIT. ITA NO.878-CHD-2019 SHRIBIKRAMJEET SINGH, CHANDIGARH 11 7.2 FURTHER ,WE FIND, THAT THE ISSUE ON WHICH LD. P CIT HAS EXERCISED HER POWERS U/S 263 AS PER THE SHOW CAUSE NOTICE, IS TOO TRIVIAL, INVOLVING INCOME OF RS. 2.54 LACS ONLY, TO JUSTIFY EXERCISE OF THE EXTRAORDINARY POWER OF REVISION U/S 263 OF THE ACT, WHICH HAS GRAVE AND SERIOUS CON SEQUENCES, TO THE PREJUDICE OF ASSESSES, OF RELOOKING INTO AN ALREADY CONCLUDED ASSESSMENT. 8. IN VIEW OF THE ABOVE, SINCE WE HAVE FOUND THE IMPUG NED ORDER OF THE LD. PR.CIT U/S 263 OF THE ACT, TO HAVE BEEN PASSED IN AN ARBRITRARY MANNER, WITHOUT CONFRONTING THE ASSESSEE WITH THE ERROR IN THE ORDER OF THE AO ,AND BASED ON INCORRECT APPRECIATION OF FACTS, WE HAVE NO H ESITATION IN SETTING ASIDE THE ORDER OF THE LD. PCIT PASSED U/S 263 OF TH E ACT. 9. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED ON 28/10/2020. SD/- SD/- ( ) ( # $ % &' ) (SANJAY GARG) ( ANNAPURNA GUPTA) / JUDICIAL MEMBER '( / ACCOUNTANT MEMBER DATED : 28/10/2020 .. / AG &* +,-, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' . / CIT 4. ' . ( )/ THE CIT(A) 5. ,/0 1 , $1 , 23405 / DR, ITAT, CHANDIGARH 6. 046# / GUARD FILE