skn 1 1010.17-itxa.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1010 OF 2017 Pr.Commissioner of Income Tax-9. Appellant. V/s. M/s.Cartier Leaflin Pvt. Ltd. Respondent. Tejveer Singh for Appellant. Satish Mody with Aasifa Khan for Respondent. CORAM : M.S. SANKLECHA AND NITIN JAMDAR, JJ. DATE : 15 October 2019. P.C. : This appeal under section 260-A of Income Tax Act, 1961 (Act) challenges order dated 21 September 2016 passed by Income Tax Appellate Tribunal (Tribunal). impugned order dated 21 September 2016 is in respect of assessment year 2011-12. 2. Revenue has urged following question of law for our consideration: Whether in facts and circumstances of case Tribunal was correct in law in cancelling order of Commissioner of Income Tax passed under section 263 of Income Tax Act, 1961 without appreciating that ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:33 ::: skn 2 1010.17-itxa.doc Assessing Officer has not brought anything on record to indicate that he had applied his mind while accepting claim of operating loss of Rs.8,79,80,896/-? 3. Respondent- assessee is engaged in business of financing and trading in shares. Respondent filed its return of income for subject assessment year on 27 September 2011 declaring total loss at Rs.11.29 crore. Assessing Officer passed order under section 143(3) of Act making few disallowances/ additions resulting in assessment of Respondent s income at Rs35.50 crore. 4. Thereafter Principal Commissioner of Income Tax issued notice dated 24 February 2014 under section 263 of Act calling upon Respondent to show cause as to why power under section 263 of Act should not be exercised in respect of assessment order dated 28 March 2014 on ground that same is erroneous and prejudicial to Revenue. basis of above show-cause-notice is that operating loss of Rs.8.79 crore was not examined into by Assessing Officer inasmuch as he neither called for any details nor any explanation to satisfy himself that loss of Rs.8.79 crore claimed by assessee is correct. This on grounds as reproduced in show cause notice which read thus: This figure of Rs.8,79,80,162/- shown under other operating losses seems to be trading loss incurred by company out of its business of financial and capital market activities as reported by Tax Auditors in Col. No.8 of form 3 CD, being its main business activity. However, on ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:33 ::: skn 3 1010.17-itxa.doc perusal of assessment records it is noticed that neither any details nor any explanation to arrive at said loss of Rs.8,79,80,162/- is either filed by assessee or called for by Assessing Officer. No examination of books of account, transaction accounts of share trading activity carried out by assessee viz-a-viz D-mat accounts of assessee is carried out by Assessing Officer during course of assessment proceedings. In other words, entire operating loss as mentioned above is accepted by Assessing Officer without any verification or proper application of mind. It is not known, how assessee has debited net other operating loss in its P & L account without specifying details of opening stock, purchases, sales and closing stock and Assessing Officer has accepted same without seeking any further details and making enquires thereof. Therefore, to this extent assessment order passed by Assessing Officer is prima facie appear to be erroneous and prejudicial to interest of revenue within meaning of provisions of section 263 of Act. 5. In spite of Respondent s objection, Commissioner of Income Tax by order dated 20 March 2015 exercised his powers under section 263 of Act. By order dated 20 March 2015, he and set aside assessment order dated 28 March 2014 and directed Assessing Officer to pass fresh order in accordance with law for subject assessment year. 6. Being aggrieved by order dated 20 March 2015 of Commissioner of Income Tax, Respondent preferred appeal to Tribunal. impugned order of Tribunal notes that from record available it is evident that during course of assessment ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:33 ::: skn 4 1010.17-itxa.doc proceedings, exhaustive details and documentary evidence were called for by Assessing Officer from Respondent to justify operating loss of Rs.8.79 crore. In particular, impugned order refers to replies dated 11 November 2013, 3 December 2013 and 24 January 2014 wherein complete details in support of its claim of operating loss of Rs.8.79 crore were made available by Respondent to Assessing Officer. In fact, manner in which operating loss of Rs.8.79 crore was arrived at was submitted in tabulated form along with itemwise details of all transactions during assessment proceedings leading to order dated 23 March 2014. On aforesaid facts and circumstances, Tribunal came to conclusion that show cause notice under section 263 of Act seems to have been issued by Principal Commissioner of Income Tax without even examining assessment records from which it is clear that detailed enquiry was done by Assessing Officer in respect of Respondent s claim that there was operating loss of Rs.8.79 crore. On merits, it held that view taken by Assessing Officer after examination of exhaustive details and evidence was possible view. In above circumstances, order dated 20 March 2015 of Commissioner of Income Tax was quashed and set aside. 7. We find that finding of fact order of Tribunal that proceedings under section 263 of Act, on face of it, have been initiated without examination of records before Assessing Officer is not shown to be perverse. It is clear that ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:33 ::: skn 5 1010.17-itxa.doc show cause notice proceeds on basis that books of accounts, transaction accounts of share trading carried out by assessee vis-a-vis D-mat accounts have not been examined by Assessing Officer during course of assessment proceedings. However, we note that in assessment order dated 28 March 2014 itself in paragraph-5.2, Assessing Officer has recorded that he examined D-mat account in order to verify share trading activities claimed by assessee. Moreover before passing assessment order, sale, purchase and closing stocks were also examined by Assessing Officer. Thus, basis to invoke section 263 of Act factually did not exist as there was due enquiry by Assessing Officer during assessment proceedings leading to assessment order dated 28 March 2014. Thus, it is amply clear that Assessing Officer has applied his mind while accepting claim of Respondent of operating loss of Rs.8.79 crore making proceedings under section 263 of Act bad in law. In any event, view taken on fact by Assessing Officer is possible view and same is not shown to be bad. 8. In above view, question as proposed does not give rise to any substantial question of law. Thus, not entertained. Appeal is, therefore, dismissed. (NITIN JAMDAR, J.) (M.S. SANKLECHA, J.) ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:33 ::: Pr. Commissioner of Income-tax-9 v. Cartier Leaflin Pvt. Ltd