SHRI RAVINDRAKUMAR HIRALAL SHAH,VISANAGAR vs. THE PR. CIT-3, AHMEDABAD

आदेश/ORDER

PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the Revision order dated 31.03.2021 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Principal Commissioner of Income Tax, Ahmedabad-3, relating to the Assessment Year (A.Y) 2016-17.

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based share transaction. Thus the Ld. A.O. added Rs. 4,48,530/- as the business income and Rs. 2,27,945/- as the speculative profit for the relevant assessment year and determined the total income of Rs. 11,74,930/- and demanded tax thereon.

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With reference to the aforesaid subject matter, I am in receipt of notice of proposal revision u/s. 263 of the ITA on the scrutiny assessment passed vide order dated 20/12/2018. In this regard, 1 humbly object to the proposed revision proceedings on the following facts and merits of the case as below: [1] Your goodselfs kind attention is drawn to the various replies filed and available on record that I have been doing business as sub-broker of various clients in listed securities, apart from income from various partnership firms from where I earn interest on capital and remuneration as business income. The business modus operandi as sub-broker has been to enter into securities transactions on behalf of clients against payments received for stocks bought by them through licensed terminal supplied by Kirit R. Shah and Stock Brokers Private Limited. Hence, on basis of turnover effected, 1 have received sub-brokerage from Shri Yogeshbhai Dahyalal Patel, broker of Kirit R. Shah and Stock Brokers Private Limited.

[2] Further, your goodself will appreciate the fact that details of clients who have entered into equity transactions including name, address, pan and confirmation of accounts are already on record with submission dated 21/11/2018. Hence, notice alleging that details of contract receipts, person from whom such receipts received, mode of receipt etc. is not available in scrutiny records is devoid of merit and facts of our case. I therefore request to drop the proceedings if the sole reason for proposing revision is on this ground alone. The AO on the basis of detailed scrutiny and verification alone has assessed the income @8% of such receipts by application of mind. The transactions as entered into are supported by contract notes, certificate issued in Form 10DB, confirmation of clients and broker who has independently confirmed the transactions made. Hence, by no stretch of imagination, it can be regarded as undisclosed/unexplained income on the basis of scrutiny records available on file.

Your goodselfs kind attention is drawn to the contra confirmatory account of the assessee from the main broker Kirti R Shah Share and Stock Broker P. Ltd., submitted during the assessment proceedings by me on 06/10/2018, the details of the account run as under. (i) Opening balance of assessee on 01/04/2015 Rs. Nil. (ii)Total debit in the account Rs. 4,82,83,339/- (which consists of trading Bills amount debit Rs.36206810/-; and banks account transactions debit amount Rs.12076469/-) Whereas on the other hand; (iii)Total Credit in this account Rs. 4,82,83,358/- (which consists of bills transaction credit Rs.30600259/-; and bank transaction credit Rs.17683099/-) (iv)Closing Balance of account Rs. 41/- Dr.

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It is pertinent to note that during assessment proceedings vide notice dated 22/10/2018, the learned AO asked the assessee the source of the above payment of Rs.1,76,83,099/-considering it as an investment of the assessee, then assessee filled detailed reply regarding the issue with reply letter dated 01/11/2018 and thus the AO was made aware the fact regarding the above issue, by furnishing the cash book of the assessee as well as by furnishing the details of clients who have entered into equity transactions including name, address, pan and confirmation of accounts are already on record with submission dated 21/11/2018. Thus, it is evident beyond doubt that not only details regarding the amount of Rs.56,06,630/- but the entire amount details for Rs.1,76,83,099/- were provided to AO during the assessment proceedings. Besides, this amount Rs.1,76,83,099/- were recorded in the books of accounts of the assessee and it is fully explained with reference to source also and so it never be regarded as unexplained/undisclosed income of the assessee. Further, it is worthwhile to mention that in equity grading contracts on recognized stock exchange the TDS provisions are not applicable.

Your goodself will appreciate the fact that during the assessment proceedings, a copy of Bank account of the assessee having current bank account no 221120110000002 of BANK OF INDIA visnagar branch was filled as on 24/05/2018. It is evident from this account the entire payment of Rs.1,76,83,099/- was made to main broker Kirti R shah Stock Broker P. Ltd. as reiterated throughout the assessment proceedings that the assessee had simply worked as a share Sub broker for the main broker Kirti R Shah stock broker P. Ltd. Further, whatever payment received by him from his customers were transferred or ultimately credited in the Bank account of Kirti R Shah stock broker P. Ltd., and thus assessee had not made any investment from this or any other bank account or in cash as enquired by the AO in the notice letter dated 22/10/2018. It is pertinent to note that being a share sub broker the assessee was entitled to 1% commission on total volume of trading in equity from his main broker, instead, had shown this income at Rs.1,71,570/- and then again by reply letter dated 19/12/2018 he had offered 8% income for the figure Rs.56,06,630/- (difference between bank transaction credit Rs.17683099/- and banks account transactions debit amount Rs.12076469/-) to buy peace, to avoid further litigation and in the interest of his business and further more to co op with the department he had paid the demand of Rs.2,22,120/- on the assessed income in time. Hence, at no stretch of imagination the order passed is either erroneous or prejudicial to the interest of revenue.

[3] I may draw your goodselfs kind attention to the fact that all the records as called for vide para 5 of the notice is available with scrutiny submissions as per summary below:

SI. No. Particulars called for under notice Reference to submissions of scrutiny proceedings

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(i) Copy of all bank account statements Dated 24/05/2018 (ii) Copies of contract notes/bills raised Dated 26/10/2018 Copies of P&L A/c; Scrip-wise statement of transaction Dated 24/05/2018 summary, demat account (iii) Working of capital gain or business income Dated 24/05/2018 (iv) Form 10DB Dated 24/05/2018 (v) Ledger a/c of broker with source of bank payments Dated 21/11/2018 (vi) Confirmation a/c from clients Dated 21/11/2018 Confirmation a/c from broker Dated 06/10/2018

Your goodself will henceforth appreciate the fact that all the records are available with scrutiny submissions and hence proposal for revision is against the facts of my case.

[4] Your goodselfs kind attention is drawn to the legal merits of the case wherein provisions of Section 263 of the Act does not provide for the substitution of the judgment of the Commissioner for that of the assessing officer, unless the decision of the assessing officer is held to be erroneous. Therefore, order of assessing officer cannot be termed as erroneous merely because there is possibility of a view contrary to view taken by assessing officer. Hence, in view of the matter at hand, the provision of section 263 cannot be invoked for merely making a fishing enquiry.

[5] An order can be said to be erroneous" if AO had not made enquiry on a relevant issue. An enquiry made by AO, considered inadequate by the CIT, cannot make the order of AO erroneous. AO had certainly conducted enquiry with regard to the issue of payments made to Kirit R. Shah and Stock Brokers Private Limited to the tune of Rs.56,06,630/-. There is no law, which provides for the extent of enquiry being called adequate. Here, it is the issue found error in the order of AO and still directed him to make assessment de novo. These things contradict each other. The act of the CIT calling for making further enquiries and assessment de novo showed that the CIT was not sure as to the original order being erroneous. The revision was not therefore justified. Reliance is place in the matter of Vardhman Industries Ltd. v. Dy. CIT (2017) 153 TR (A) 566 (Chand-Trib).

[6] It is pertinent to note here that the phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be

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treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by, the Income Tax Officer is unsustainable in law. The power to revise cannot be exercised merely on the ground that the order is prejudicial to the revenue. It must also be shown that such order is erroneous in law. Therefore, an assessment, which is in accordance with law, cannot be said to be erroneous though it may be prejudicial to the revenue and such an order cannot be the basis of revision under section 263. [7] There is distinction between lack of inquiry and inadequate inquiry. If there was any inquiry, even inadequate, that would not by itself give occasion to Commissioner to pass orders under section 263, merely because he had different opinion in the matter. It only in case of lack of inquiry that such a course of action would be open. I hope your goodself is satisfied with the aforesaid information and explanation in this regard and earnestly urge your goodself to kindly drop the proceedings on the abovesaid facts and legal merits of the case and oblige.

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neither erroneous nor prejudicial to interest of Revenue nor satisfied other conditions of Sec 263 of the Act, so that the entire action on part of Pr, CIT was illegal and unlawful. 2.1. The id. Pr. CIT has grievously erred in law and on facts in holding that the order of assessment passed u/s 143(3) On 20-12-2018 by AO was erroneous and prejudicial to interest of Revenue in as much as the AO had failed to correctly observe facts on record in relation to the transaction with Broker Kirit R Shah share & stock brokers Pvt. Ltd. 2.2. That in the facts and circumstances of the case as well as in law, the Ld. Pr. CIT has grievously erred in law and on facts in holding that the order of assessment passed u/s 143(3) on 20-12-2018 by AO was erroneous and prejudicial to interest of Revenue. It is therefore prayed that the order of revision u/s. 263 was illegal & bad in law or in alternative the entire sale price was not undisclosed income.

7.1. The Ld. Counsel Mr. S.N. Divetia appearing for the assessee filed before us a Paper Book containing various details filed by the assessee before the Assessing Officer during the course of assessment proceedings, more particularly in response to the notices issued u/s. 142(1) calling for various details and submitted that after through verification of the entire transaction, the Assessing Officer accepted the 8% presumptive income offered by the assessee. The Ld. A.R. further submitted that it is evident beyond doubt that not only details regarding the amount of Rs. 56,06,630/- but the entire amount for Rs. 1,76,83,099/- were provided to the A.O. during the assessment proceedings and the entire amount of Rs. 1.76 crores were recorded in the books of accounts of the assessee and fully explained with reference to source also. It is to mention that in equity, trading contracts on recognized stock exchange the TDS provisions are not applicable. Thus the assessment order passed by the Assessing Officer is

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neither erroneous nor prejudicial to the interest of Revenue and assessment order cannot be termed as erroneous merely because there is possibility of a view contrary to view taken by the Assessing Officer. In such a case provision of Section 263 cannot be invoked for merely making a fishing enquiry. Similarly the enquiry made by the Assessing officer is considered to be inadequate by the Ld. PCIT that cannot make the assessment order erroneous. There is no law which provides for the extent of enquiry being called adequate. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. When an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the Ld. PCIT does not agree, it cannot be treated as an erroneous order and prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is unsustainable in law. Thus the Ld. PCIT in the above case has not demonstrated how the assessment order as an erroneous order and prejudicial to the interest of revenue and therefore the invocation of revision proceedings u/s. 263 is bad in law and liable to be quashed.

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Officer during the assessment proceedings has issued 142(1) notices on 17/05/2018, 23/07/2018, 22/09/2018, 02/10/2018 and a show cause notice dated 09/11/2018 calling for various details from the Assessee. In response to the same, the assessee also filed various details on 18/05/2018, 01/11/2018, 19/12/2018 including Certificate of STT paid as well as ledger account of Trading and profit and loss account etc. and submitted that the assessee had not made many gain or loss as shown in the trading account of the main broker firm namely KIRTI R. SHAH SHARES AND STOCKBROKERS P. LTD. The gain or loss is attributed/allocated to different clients who had made trade in equity through the assessee with the main broker of Bombay. Thus non speculative loss of Rs. 25,96,337/- as well as speculative profit of Rs. 2,27,945/- were allocated and belonging to different clients/customers. The assessee has no right to have profit or loss on this equity trading account for the year under consideration.

9.1. We also note that the Assessing Officer vide notice dated 09/11/2018 (i) requested the assessee to furnish the source of investment of Rs. 1.76 crores with proper evidences. In the absence of any evidence why the same should not be added as the total income of the assessee as unexplained investment u/s. 69 of the Act. (ii) requested to submit all the details mentioned in the trading statement provided by the assessee. The assessee responded on 21/11/2018 stating that the total payments to the main broker was of Rs. 1,76,83,099/-. In the same account there is total receipt of Rs. 1,20,75,801/-. Thus the net payment was of Rs. 56,07,298/- for which the assessee was sending confirmatory contra accounts

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duly signed by the clients, their full address and Pan Number details and further the summery list shown clients name address Pan Number Aadhar Card Copy etc.

9.2. It is seen from the revision order that the Ld. PCIT after perusal of the material available on record and found that the issues pointed out in the show cause [extracted in para 3 above] needs verification. The Ld. PCIT held that the assessee’s claim with regard to the transaction pertaining to the shares and the resultant gain/profit/loss is not verifiable. During the course of original assessment proceedings, the assessee failed to furnish the said details and evidences. That’s why the assessee himself offered 8% of difference amount of bank credits and debits as presumptive income and entire amount of Rs. 56,06,630/- was required to be treated as unexplained income and added to the total income of the assessee. Therefore invoking Explanation 2(a) of Section 263(1) of the Act, the Ld. PCIT set aside the assessment order passed by the Assessing Officer as erroneous and prejudicial to the interest of revenue. The Ld. PCIT pointed out the issues mentioned in the show cause notice needs verification but it is seen from the Paper Book that all the details were filed by the assessee before the Assessing Officer during the assessment proceedings and after detailed enquiry and verification of records, the assessing officer completed the assessment order. The Ld. PCIT has not demonstrated in his order how the order passed by the Assessing Officer as erroneous order. The Assessing Officer has adopted one of the courses permissible in law, if it has resulted in loss of revenue, the same cannot be treated as an erroneous order which

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requires revision u/s. 263 of the Act. Therefore in our considered view, the invocation of Revision proceedings u/s. 263 of the Act itself unjustifiable, against the provisions of law and therefore, the same is hereby quashed.

Order pronounced in the open court on 23-11-2022

Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 23/11/2022 TRUE COPY आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 15 /11/2022 2) Date on which the typed draft is placed before the Dictating /11/2022 Member & Other Member 3) Date on which the approved draft comes to the Sr. P.S./P.S. /11/2022 4) Date on which the fair order is placed before the Dictating /11/2022 Member for pronouncement 5) Date on which the fair order comes back to the Sr. P.S./P.S. 23/11/2022 6) Date on which the file goes to the Bench Clerk 23/11/2022 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order