INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Notice issued on the ground that books of account, transaction accounts of share trading carried out by assessee vis-a-vis D-Mat accounts have not been examined by AO -

Assessee was engaged in business of financing and trading in shares. AO passed an order under section 143(3) making few disallowances/additions. Thereafter PCIT issued notice under section 263 calling upon assessee to show cause as to why power under section 263 should not be exercised in respect of assessment order on the ground that the same was erroneous and prejudicial to the Revenue. The basis of the above show-cause-notice was that operating loss was not examined into by AO inasmuch as he neither called for any details nor any explanation to satisfy himself that the loss claimed by assessee was correct Held: In the assessment order, AO had recorded that he examined D-mat account in order to verify the share trading activities claimed by assessee. Moreover, before passing assessment order, sale, purchase and closing stocks were also examined by AO. Thus, basis to invoke section 263 factually did not exist as there was due enquiry by AO during the assessment proceedings. It was amply clear that AO had applied his mind while accepting the claim of assessee of operating loss making the proceedings under section 263 bad in law.

REFERRED : M/s Cartier Leaflin Pvt. Ltd. v. ITO [ITA No. 2284/Mum/2015, dt. 21-9-2016] : 2016 TaxPub(DT) 4484 (Mum-Trib)

FAVOUR : In assessee's favour

A.Y. :

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