INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Lack of enquiry on AO's part -

Pr.CIT invoked jurisdiction under section 263 and treated assessment order as erroneous and prejudicial to the interest of revenue on the ground of AO not having made proper enquiry as regards huge transactions in stock market and commodities and cash deposits in bank. Assessee referred to his ledger account in the books of broker and submitted that assessee was doing share trading business on behalf of many small time individuals who used to pay cash to assessee to recoup for the losses incurred by assessee for transaction carried out on their behalf on the platform of exchange through Labdhi Finance Corporation. The source of cash deposits in bank as well as source of payment to the broker was, thus, fully explainable from the books of accounts, as verified by AO. Held: It is common knowledge that stock market regulations do not permit a share broker or market intermediary to accept cash payments against transactions carried out on the platform of stock exchange.The client is expected to deal with share broker only through banking channel. The case made out on behalf of assessee that transactions were carried out on behalf of unknown clients from whom cash was received remained totally unsubstantiated. No tangible enquiry had been made by AO into the circumstances which led to so called arrangement whereby cash was given by unidentified people to assessee for doing transactions on their behalf where arrangement itself was violative of regulated procedure. The source of cash had remained unexplained before AO indeed in the absence of proper verification in this regard and thus assessment order was rightly treated as erroneous in so far as prejudicial to the interests of Revenue .

REFERRED :

FAVOUR : in assessee's favour

A.Y. :

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