TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 424
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....cumstances of the case and in law the Ld. Pr. CIT erred in setting aside the Assessment order as passed by Ld. A.O. u/s 147 of the Act just to verify the claim of Short term Capital Loss from M/s Xpro Securities even when the reason for reopening the case of the appellant was to examine the loss of Rs. 32745549/- from M/s Xpro Securities only and more so when the entire documents related to the said loss were duly filed by the appellant during the course of Assessment Proceedings and have duly been verified by Ld. AO after full application of mind. The present order so passed by the Pr. CIT by invoking the provision of section 263 of the Act is therefore illegal and bad-in-law. It is prayed that the same requires to be quashed." 2. The assessee is an individual and filed his return of income on 25th September 2016 declaring total income of Rs. 5,35,510/-. The case was selected for limited scrutiny through CASS and assessment was completed u/s 143(3) on 09.12.2018 accepting return income. Subsequently, the assessment was reopened by issuing notice u/s 148 of the Act on 26.03.2021 to assess the income assessable to tax has escaped assessment on account of fictitious loss booked by t....
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....come as declared in the original return of income after setting of business loss of Rs. 3,56,04,837/-. Ld. AR has referred to the reasons recorded by the AO for reopening of the assessment and submitted that the only point of reopening of the assessment is the claim of loss of Rs. 3,56,04,837/- from the F&O transactions carried out through M/s Xpro Securities was to be assessed tax by treating the same as fictitious entries of loss obtained by the assessee. During the reassessment proceedings the AO issued show cause notice u/s 142(1) dated 09.03.2022 which was replied by the assessee vide reply dated 15.03.2022. The assessee also produced the relevant supporting documents including copy of account of derivative transactions, ledger account of M/s Xpro Securities (broker) in the books of assessee, copy of contract note issued by M/s Xpro Securities during the reassessment proceedings. The AO after considering reply as well as documentary evidences was satisfied and again accepted the return income while passing order u/s 147 r.w. section 144B of the Act on 28.03.2022. Thus, Ld. AR has submitted that this issue was examined by the AO during the original security assessment as well a....
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....83 (SC) (ii) CIT (Central), Ludhiana v. Max India Ltd. reported in [2008] 166 Taxman 188 (SC) (iii) CIT v. Sunbeam Auto Ltd. reported in [2011] 332 ITR 167 (Delhi) (iv) DIT v. Jyoti Foundation reported in [2013] 357 ITR 388 (Delhi) 3.2 Ld. AR has submitted that when the AO during the course of original assessment as well as reassessment proceedings made extensive inquiries and was satisfied with the correctness of the claim of the assessee then the order passed by the AO cannot be held as erroneous so far as prejudicial to the interest of the revenue for want of inquiry. Once the AO has already conducted inquiry twice during the original assessment as well as reassessment proceedings then the explanation (2) to section 263 cannot be interpreted in a manner to make inquiries unending. Ld. AR has thus contended that when the AO has examined the issue, applied his mind and reached to a conclusion which is legally possible view then the commissioner cannot be invoke the provisions of section 263 merely, because he does not agree with the view of the AO. Hence, the AR has submitted that the impugned order passed by the Pr. CIT is not sustainable in law and liable to be quashed. ....
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.... 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually. Sd/- Yours faithfully, SHRIPRAKASH SHARMA ITO, BURHANPUR ANNEXURE 1. Please furnish details of all bank accounts mentioning account numbers, branch address along with bank statements. 2. You have claimed short term capital loss of Rs. 3,56,04,837/- on transfer of units equity oriented (through stock exchange). Please furnish details of cost of acquisitions of units with broker's notes in respect of purchase of these securities. Please also furnish evidence with regard to the transfer of these units. 3. Please furnish copy of sale deeds (both side) in respect of immovable properties sold during the year. You are also requested to submit evidence regarding cost of acquisition and improvement of properties as claimed in your computation of income. Please state whether there is any difference in guideline value of the properties and sale value of the same. If yes, please explain as to why provisions of section 50C should not be invoked in your case. 5.1 Thus, the AO has raised specific quarries about the claim of short term capital loss of Rs. 3,56,04,83....
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....ment was completed u/s 143(3) on 09.12.2018 accepting the returned income. In this connection, information available in Insight portal shows that in pursuance to survey action u/s 133A by Investigation Unit Mumbai under Project Falcon, it was found that various brokers are engaged in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. One of such stock brokers admitted in his statement that he was engaged in providing fictitious losses/profit through BSE equity/derivative trading through his concern M/s Xpro Securities. As per information, the above assessee had booked fictitious losses through the concerned entity M/s Xpro Securities. On perusal of records with this office, it is observed that the assessee had booked fictitious losses from M/s Xpro Securities during the subject year aggregating to Rs. 3,27,45,549/-. Thus, I am satisfied that the income of the assessee has been under-assessed to this extent. In view of the above, I have reason to believe that the income chargeable to tax to the tune of Rs. 3,27,45,549/- has escaped assessment within the meaning of section 147 of the Income-tax Act. Accordingly, notice u/s 148 o....
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....unting to Rs. 3,27,45,549/- pertaining to an entity named 'XPRO SECURITIES PVT LTD. You are requested to show cause as to why the amount of Rs. 3,27,45,549/- should not be added to your returned income. 4. In ITR, you have shown capital loss of Rs. 3,56,04,837/-. Please furnish the computation of the capital loss along with documentary evidences. 5.5 The Only issue raised by the AO in the reassessment proceedings is regarding the loss booked by the assessee on derivative transactions through broker M/s Xpro Securities. The assessee filed its reply dated 15.03.2022 placed at page no.15 to 17 as under: "Sub Reply to Notice u/s 142(1) of the Income Tax Act, 1961. ITBA/AST/F/142(1)/2021-22/1040493159(1) dated 09th March 2022 Ref: Assessee: Shri Narendra Kumar Agrawal 203,C.K. Campus Bahadarpur Road, Burhanpur(MP) Α.Y: 2016-17 PANo.: ADAPA01318 Status: Individual With reference to above and as required by you the assessee submit herewith the following: 1. A copy statement of computation of income (balance sheet if applicable) for the relevant assessment year and Annual Financial Statement for the relevant AY. The Computation of Income for the Assessment Year....
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....ses are proposed to be disallowed it is the duty of the Department to prove how and on what basis/facts the losses are not allowable and addition is proposed. Just by stating that in Project falcon it is found that the entity with which the Assessee has dealt with is providing ficticious losses with M/s Xpro Securities. Further, stating that various brokers are engaged in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. The information or belief is one sided and now you can verify our records which clearly shows that all payments are made from normal banking channels and losses are paid for to the broker. There are no facts that the losses are provided to the Assessee. The Assessee has entered into genuine trades with the Broker. Without providing any information against the Assessee the Additions cannot be made and the Assessee must be given an opportunity to explain its stand as to the information available with the Department with regard to Assessee booking fictitious losses. The assessee had acted as a Bonafide trader and complied with all procedures and requirements of the stock exchange. At the time of relevant transacti....
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....8 of the Act was issued and duly served upon the assessee. In compliance, the assessee filed his ITR for the Α.Υ. 2016-17 on 08.04.2021 and declared total income of Rs. 5,35,510/-. Notice u/s 143(2) of the Act was served to the assessee on 29.06.2021. In response, the assessee raised objections to the re-opening of assessment u/s 147 of the Act, which were disposed on 15.12.2021. Notice u/s 142(1) of the Act was issued and served upon the assessee on 09.03.2021 wherein assessee was asked to furnish details of the capital loss of Rs. 3,56,04,837/- as per ITR filed by assessee. In compliance, the assessee has submitted reply on 15.03.2022. 03. In view of the above facts and circumstances of the case, the returned income of the assessee is accepted. 04. The order is being passed u/s 147 r.w.s 144B of the Income tax Act, 1961. Give Credit for prepaid taxes. Issue demand notice/penalty notice/ challan accordingly. Charge interest u/s. 234A/2348/234C/234D as and where applicable. Tax Computation sheet is enclosed herewith." 5.7 The AO has specifically mentioned that in-compliance to notice u/s 148 the assessee has filed his return of income on 8th April 2021 declaring ....
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.... the case as well as replies submitted by the assessee, on the basis of documents available on records, the assessment order u/s 147 r.w.s. 144B of Act was passed on 28/03/2022 accepting the returned income. 4. On perusal of the case records, it is observed that the assessee had sold three properties on 24/11/2015, 09/02/2016 and 31/03/2016 at the cost of Rs. 1,57,00,000/-, 1,81,50,000/- and 1,24,70,353/- respectively. He earned Long Term Capital Gain (LTCG) of Rs. 1,19,57,593/-, 1,21,96,669/- and Rs. 1,15,79,071/- respectively thereon, totaling to Rs. 3,57,33,333/-. It is observed from the contract notes of Xpro Securities and other share broking firm that the assessee immediately after/before earning capital gain, get short term capital loss within few days which clearly shows that the capital loss was manipulated to reduce tax liability of LTCG; therefore, the same was not allowable and liable to disallowed and to be added to the total income of the assessee. 5. During the course of assessment proceedings, you have neither furnished any details nor explained the issues involved with relevant documentary evidence with regard to issues narrated above. It appears that submissio....
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.... from derivative transactions on stock exchange. Even in the reasons recorded by the AO for reopening of the assessment it is alleged that the broker M/s Xpro Securities is found engaged in in facilitating fictitious losses through coordinated and premeditated trading in illiquid stock options. However, from the details of the transaction resulting loss in question as placed at page no.22 to 42 of the paper book it is found that most of the transactions are in the well-known scripts like Exide Industries, HCL technology, RECL, Voltas, BEML, Just Dial, Infosys, ACC Cement Ltd, Balaji Tally Films, Bata India Ltd. HPCL, IBHF, GMR Infra, L& T, AIHPC, etc.. Thus, it is clear that the scripts in which the assessee has carried out these derivative transactions are not illiquid scripts as alleged in the reasons recorded for reopening of the assessment but these are all well known, well traded scripts with high volumes on the stock exchange. Though the AO has not given any elaborate finding in the order however, it is manifest from the record available before the AO that after conducting inquiry he was satisfied with the reply and supporting evidences and consequently no disallowance was ma....
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....e case in hand the Pr. CIT observed in para 6 of the impugned order as under: "6. It is worth to mention here that on perusal of the order sheet nothings, it can be observed that the AO has not neither conducted any enquiry to verify the aforesaid issue nor made any addition on the aforesaid issue to the total income of the assessee. Hence, the above referred issue related to claim of bogus short term capital loss through M/s Xpro Securities remained to be examined. Accordingly, the assessment order passed is erroneous in so far as it is prejudicial to the interest of the revenue." 5.9 The above observation of Pr. CIT is contrary to the facts and record as available with the AO and referred in the forgoing part of this order which includes the show cause notice issued by the AO reply along with supporting evidences filed by the assessee. The Pr. CIT then set aside the order of the AO in para 11 of the impugned order as under: "11. Therefore, in view of the above discussion, I am of the considered opinion that the assessment order dated 28/03/2022 for A.Y. 2016-17 is erroneous in, so far as it is also prejudicial to the interest of revenue on account of passing of the assessmen....
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....rder is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open." 5.11 Similarly in case DIT vs. Jyoti Foundation (supra) the Hon'ble Delhi High Court has reiterated its view in para 4 as under: "4. Revisionary power under Section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which....