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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI RAJESH KUMAR, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 27.03.2019 passed by the Principal Commissioner of Income Tax-32, Mumbai [hereinafter referred to as the “PCIT”] relevant to the A.Y.2009-10 in which the Principal Commissioner of Income Tax-32 has invoked the provisions u/s 263 of the I.T. Act, 1961.
The assessee has raised the following grounds of appeal: - “The ground or grounds of appeal are without prejudice to one another.
1. On the facts and in the circumstances of the case and in law, the Id. Pr. CIT-32, Mumbai erred in holding that the assessment order dated 22-12- 2016 passed u/s.143(3) r.w.s. 147 by the Asst. CIT, 32(3), Mumbai is erroneous in so far as it is prejudicial to the interest of the revenue by invoking the provisions of section 263 because in his opinion, the additions of Rs.1,05,16,040/- and Rs.3,15,482/- are made u/s.68 and 69C respectively ought to have not been set off against the loss incurred during the year and thereby further erred in setting aside the assessment order and directing the AO to complete the assessment accordingly 2 A.Y. 2009-10 2. The Id. Pr. CIT-32, Mumbai failed to appreciate that :- a) the assessment order dated 22-12-2016 passed u/s.143(3) r.w.s. 147 by the Asst. CIT-32(3), Mumbai is in accordance with the law and the same cannot be branded as erroneous simply; b) the basic requirement of assuming jurisdiction u/s.263 is not present; and c) the presumption as to additions being made u/s.68 and 69C are non-existing or contrary to the facts of the case.
In reaching to the conclusion and coming to such conclusion the Id. CIT omitted to consider relevant factors, considerations, principles and evidences while he was oven helmed, influenced and prejudiced by irrelevant considerations and factors.
4. The order passed u/s.263 by the Id. CIT is contrary to the provisions of law. The Appellant craves leave to add, alter, amend or delete any or both of the above grounds of appeal
.”
3. The brief facts of the case are that the assessment of the assessee was completed on 22.12.2016 determining the income at loss of Rs.18,32,025/- as against the return loss of Rs.1,26,63,547/- u/s 143(3) r.w.s. 147 of the I.T. Act, 1961. The proposal u/s 263 of the Act was sent by the ACIT- 32(3), Mumbai on 22.10.2018 which was forwarded by the Jt. CIT, Range- 32(3), Mumbai vide letter dated 25.10.2018. A show-cause dated 19.11.2018 was issued and the contents of the show-cause notice is hereby reproduced as under: - “'2. It is seen from the available information and record that Return of income was filed for the A. Y. 2009-10 on 22.08.2009 declaring the loss of Rs.1,26,63,547/-. The case was selected for scrutiny. The assessment u/ s.143(3) of the LT. Act, 1961 was completed on 31.102011 accepting the return of income, and assessment order u/ s 143(3) r.w.s. 147 was passed on 22.12.2016 determining income at Rs. (-) 18,32,025/ - after making addition on account of undisclosed profit from F & 0 transaction of Rs. 1,05,16,040/ - and disallowance of commission expenses of Rs. 3,15,482/ -.
3. It is observed from record that during the assessment u/ s 143(3) r.w.s. 147 the income arrived from addition u/ s 68 & 69 has been set off against loss during the year. Income covered by Sec 68 &69 are not be placed under any head of income and there is no provision in the Act for set off of the business loss where the income is outside all the heads of income. This resulted in set off of losses of Ps. 1,08,31,5221- with consequent short levy of tax of Rs. 36,81,6351-.
4. In view of the above, the assessment order passed in your case u/s 143(3) r. w. 147 of the I T Act dated 22.12.2016, appears to be erroneous 3 A.Y. 2009-10 and prejudicial to the interest of the revenue in terms of explanation 2 to section 263 of the IT Act.
In this regard, an opportunity is being accorded to you to show cause as to why proceedings u/s. 263 of the I. T. Act should not be initiated against you and assessment order passed be revised to as mentioned above.”
In reply of the notice, the assessee has also filed the submission dated 07.12.2018 in tapal. The assessee has made the following submissions.- “"In the matter we submit that all the transactions of F&O of shores are supported by admissible evidences as discussed hereinabove and as such losses shown by the Appellant are genuine beyond doubt. The Ld AO could not brine on record any material to show that the Appellant had paid any charges not the Ld. A0 could identify the name of the person to whom such commission was paid. The addition is made purely on suspicion and guess work which have no role to play in assessment proceedings. Section-69C is attracted where evidence is discovered about an assessee having incurred expenditure outside the books of account. The phraseology used in Section 69C i.e. an assessee has incurred any expenditure" goes to show that before a section could be imposed, the condition precedent as to existence or expenditure must be conclusively established bit evident arid/or material on-record. The primary onus is, thus, is on the Department. In the case of your assessee, the AO failed to prove that the assessee has incurred expenditure over and above the amount in the books of account, the subject matter cannot be taxed u/s. 69C. In view of the above facts of the case, it is submitted that the presumption as to addition are made u/s. 68 and 69 are non-existing or contrary to the facts of the case and as such the assessment order is neither erroneous nor prejudicial to the interest of the revenue since basic requirement of assuming jurisdiction u/s. 263 is not present."
5. After considering the reply of the assessee, the Pr. CIT was of the view that the provisions of Section 68/69 of the Act was applicable in the circumstances when the income claimed is outside all the heads of income against business income loss. The CIT(A) also relied by the decision of Hon’ble Gujarat High Court in the case Fakir Mohammad HajiHasan Vs. CIT 247 ITR 290 (Guj) as well as the Hon’ble Punjab & Haryana High Court in the case of Dulari Digital Photo Services Pvt. Ltd. Vs. CIT (P&H) (2013) 94 DTR 259. The Commissioner has held that the order 4 A.Y. 2009-10 passed u/s 143(3) r.w.s. 147 of the Act dated 22.12.2016 was erroneous and prejudicial to the interest of the revenue. Accordingly, the order of the AO was ordered to be set aside and directed the AO to pass the afresh order in accordance with law. Feeling aggrieved, the assessee filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The assessee filed the return of income showing the total income to the tune of Rs.Nil with the current year loss to the tune of Rs.(-)1,26,63,547/-. The assessment was completed u/s 143(3) of the Act on 31.10.2011 accepting the returned of income. Thereafter, the case of the assessee was reopened and the re-assessment u/s 143(3) r.w.s. 147 of the Act was completed on 12.12.2016 determining total income to the tune of Rs.18,32,025/-. The description is hereby as under:- Description Amount Total income assessed u/s 143(3) (-)1,26,63,547/- Add: Undisclosed profit from F&O transaction 1,05,16,040/- Add: Commission expenses 3,15,482/- Total income (-)18,32,025/-
On appraisal of the copy of order dated 22.12.2016, the AO has arrived at this conclusion that the assessee shifted the profit in sum of Rs.1,05,16,040/- to other account so as to reduce his taxability through M/s. A.A. Stock Broking and Management by misusing the Client Code Modification (CCM) facility. The assessee has taken the accommodation entry by way of misusing the Client Code Modification (CCM) facility through M/s. A.A. Stock Broking and Management Pvt. Ltd., Mumbai and claim reduction in its profit of Rs.1,05,16,040/- after conducting the necessary enquiry which has been detailed in the order, the AO reduced the profit of Rs.1,05,16,040/- and also disallowed the commission in sum of Rs.3,15,482/- and assessed the total income at loss in sum of Rs.18,32,025/. The case of the assessee was reopened u/s 263 of the Act. It is said by 5 A.Y. 2009-10 authorities specifically that the income in sum of Rs.1,05,16,040/- nowhere fall within the income explained in the Act, therefore, the addition is liable to be raised in view of the provisions u/s 68/69 of the Act. Under this provisions, it is to be seen whether the order is erroneous and prejudicial to the interest of the revenue in terms of Explanation-2 of Section 263 of the Act. The AO has already conducted the enquiry and passed the detailed order dated 22.12.2016 and held that the assessee has concealed profit in sum of Rs.1,05,13,040/- through the same was reduced from the loss shown the return of income in sum of Rs.(-)1,26,63,547/-. However, the commission in sum of Rs.3,15,482/- was also disallowed and the income of the assessee was assessed at loss in sum of Rs.(-)18,32,025/-. Passing the order again by CIT in question seems to be review of the order dated 22.12.2016 which is not justifiable in view of the decision of the Hon’ble Tribunal in case of Jamnadas T. Mehta V. ITO (2002) 81 ITD 103 (Pun)(TM). In the instant case, the AO has applied the mind and considered the facts of the case and completed the assessment and treated the amount in question as profit which was reduced from the loss. Since, the AO applied the mind, therefore, the present case nowhere seems within the provisions of Section 263 of the Act in view of the decision of Rajasthan High Court in case of CIT Vs. Trustees of Anupam Charitable Trust (167 ITR 129) (Raj). The order cannot be termed as erroneous unless it is not in accordance with law or is the prejudicial to the interest of the revenue which is to be read in conjunction with an erroneous order passed by the AO, when an AO adopts one of the courses permissible in law and it results in loss of the revenue or where two views are possible and the AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order and prejudicial to the interest of the revenue. In this regard also we find support in law settled in