AMS TRADING AND INVESTMENT PRIVATE LIMITED,MUMBAI V. ACIT CC 2(3), MUMBAI, MUMBAI

ITA 5351/MUM/2024

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The case involves AMS Trading and Investment Private Limited, which appealed against the order of the Commissioner of Income-tax (Appeals) confirming the additions made by the Assessing Officer. The additions pertained to a loss of Rs. 1,98,50,000 treated as a capital loss, which the appellant argued should be considered a business loss. The tribunal found that the CIT(A) had dismissed the appeal on the grounds of non-prosecution without examining the merits, which was contrary to the principles of natural justice. The tribunal decided to remand the case back to the CIT(A) for a thorough examination on merits, while also imposing a cost on the assessee for their non-compliance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33958 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KRISHN KEDIA
• Assessee Lawyers: NARESH KUMAR
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Non compliance
• Section: 250

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA 5351/MUM/2024 (A.Y. 2017-18) AMS Trading and Investment Private Limited,Mumbai, Shatrunjay Apartments 1st Floor, 28 Sindhi Lane Nanubhai Desai Road, Greater Mumbai - 400 004 Mumbai Maharashtra v/s. बनाम Assistant Commissioner of Income Tax, CC 2(3),Mumbai, Room No. 803, 8th Floor, Pratishtha Bhavan, Old CGO Annexe, Maharishi Karve Road, Mumbai – 400020, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAFCA6183N Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Naresh Kumar,AR Respondent by : Shri Ram Krishn Kedia, (Sr. DR) Date of Hearing 20.02.2025 Date of Pronouncement 25.02.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 13.08.2024 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeal), CIT(A)-48, Mumbai [hereinafter referred to as “CIT(A)”] pertaining to assessment order u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 19.12.2019 as passed by the Dy. Commissioner of Income Tax, Central Circle 2(3) for the Assessment Year [A.Y.] 2017-18. P a g e | 2 ITA No. 5351/Mum/2024 A.Y. 2017-18 AMS Trading and Investment Private Limited 2. The grounds of appeal are as under:- 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred as CIT (A)) erred in confirming the additions made by Learned Assessing Officer (hereinafter referred as Ld. AO) of Rs. 1,98,50,000 treating loss as capital loss without appreciating the submission made by the appellant company dated 04.12.2019 during the course of assessment proceedings. The appellant company has treated such loss as business loss and offered profit on sale of listed equity shares as business income amounting to Rs. 1,53,48,038, it is submitted to your honour that loss on sale of share should be allowed as business loss and is required to be adjusted against the profit on sale of listed Equity shares which have been considered by the appellant as business profit. It is submitted that the addition made by the learned assessing officer is based on conjectures and surmises without giving any show cause notice. It is therefore prayed before your honour to delete such arbitrary addition and necessary direction should be given in this regards. 1.1 Without prejudice to above ground, if your honour is treating the addition of Rs. 1,98,50,000 as capital loss then the same shall be allowed to carry forward in the subsequent years and the gain on sale of listed equity shares amounting to Rs. 1,53,48,038 (on which STT is paid) shall be treated as exempt u/s 10(38) of the Income Tax Act, 1961. 3. The assessee company is mainly engaged in the business of trading and investment. During the year, it debited an amount of Rs. 1,98,50,000/-, being loss on sale of shares. On query by the ld.AO, it was P a g e | 3 ITA No. 5351/Mum/2024 A.Y. 2017-18 AMS Trading and Investment Private Limited explained that the company had main object of trading and investment, hence sale of shares was treated as business income. It had invested in shares of one Kudos Agrohols Ltd., an associate of Kudos group which defaulted in repayment of bank loan. The company was not in operation since 2012, as the bank took the physical possession of assets of the group. This group had huge bank loan which could not be repaid. In this situation, the assessee had no option but to sell the shares at realizable value. Therefore, the shares had been sold at Rs. 1,50,000/- and incurred loss of Rs. 1,98,50000/-.It was noted by the AO from the Balance Sheet as on 31.03.2017, that the shares of M/s Kudos Agroholes Ltd. were reflected under the head “Non current Investment” and Closing balance as on 31.03.2016 was Rs. 2,00,00,000/- and closing balance as on 31.03.2017 NIL. Since the assessee company has itself clarified the shares of Kudos Agrohols Ltd as an investment, the gain/loss arriving on sale of these investment has to be necessarily assessed under the head “Capital Gain”. This being the case, the loss incurred on sale of investment in shares of Kudos Agrohols Ltd was a capital loss. Further, it was also seen from the Balance sheet as on 31.03.2017 that no shares had been held by the assessee as stock in trade during the year under consideration. Thus, the loss incurred of Rs. 1,98,50,000/- was not a business loss and therefore, not allowable under P a g e | 4 ITA No. 5351/Mum/2024 A.Y. 2017-18 AMS Trading and Investment Private Limited the head “Profit and Gains of Business or profession. Acordingly, the loss incurred in sale of investment debited to profit and loss account was disallowed as it was a capital loss and added to the income. 4. In the subsequent appeal, as per the appellate order in order to decide this appeal in a timely manner a number of notices/ communications through ITBA portal were sent to the appellant, viz. Communications dated 31.05.2021, 14.06.2021, 03.10.2023, 14.11.2023, 05.01.2024, 14.05.2024, 06.06.2024 and 23.07.2024. In response to the notices sent, the appellant was merely seeking adjournment. It clearly appeared that the appellant had not even bothered to pursue this appeal in any productive manner. Hence, in view of the aforesaid total non-compliance/non prosecution of the instant appeal on the part of the appellant, the instant appeal was adjudicated and disposed of, ex-parte, primarily on the basis of documents/details available on record. 5. Before us, the ld.Authorized Representative of the assessee could not furnish any cogent reason for non compliance before the ld.CIT(A).The DR relied on the orders of authorities below. 6. We have heard the rival parties and perused the material available on records. It is observed that the ld.CIT(A) dismissed the P a g e | 5 ITA No. 5351/Mum/2024 A.Y. 2017-18 AMS Trading and Investment Private Limited appeal solely on the ground of non-prosecution. He failed to adjudicate the issues raised in the grounds of appeal and did not examine the material available on record. Such dismissal without deciding the appeal on merits is contrary to the principles of natural justice. It is settled law that it is the duty of the appellate authority to dispose of an appeal on merits after considering the material on record, even if the appellant fails to appear. 6.1. However, it is equally true that it is the fundamental duty of the assessee to diligently pursue the appeal and comply with the notices and proceedings initiated by the Revenue authorities. The framework of the Act rely heavily on the co-operation and active participation of the taxpayer. Despite the notices under section 250 of the Act by the CIT(A), no substantive explanation was submitted. The failure of the assessee to make any response before him reflects gross negligence and an indifference that is unacceptable. The principles of natural justice operate both ways, while the Revenue authorities are required to provide a reasonable opportunity of being heard, the taxpayer is equally obligated to co-operate with the authorities and utilize the opportunities extended. In the present case, despite receiving adequate opportunities, the assessee displayed a casual approach and P a g e | 6 ITA No. 5351/Mum/2024 A.Y. 2017-18 AMS Trading and Investment Private Limited indifference, which not only delayed the appellate proceedings but also burdened the judicial system. Such conduct cannot be condoned. 6.2 In light of the non-compliant attitude of the assessee, levy of cost needs to be evaluated in this case as cost serves as a necessary deterrent to ensure that taxpayers act with due diligence in pursuing their appeals and respecting the timelines and processes laid down under the law. It also emphasizes the principle that while justice must be ensured, the system cannot cater to indolence or negligence on the part of the assessee. 6.3 As the ld. AR has requested before us that the assessee may be given one more opportunity and this request which was not objected by the ld.DR, in such a scenario, we are of the opinion that the scales of justice demands that the matter should be verified and revisited at the level of ld. CIT(A) and accordingly, we are of the considered view that the matter should be remanded back to the file of ld. CIT(A) for de novo adjudication by him while applying the principles of natural justice after affording sufficient opportunity of being heard to the assessee. 6.4 Moreover, considering assessee’s non-compliant and non- co-operative attitude and lack of diligence in pursuing the appeal, we impose a cost of Rs.11,000/- on it. The cost shall be deposited to the P a g e | 7 ITA No. 5351/Mum/2024 A.Y. 2017-18 AMS Trading and Investment Private Limited credit of the Income Tax Department within 15 days of the receipt of this order and proof of payment shall be submitted before the ld.CIT(A). 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 25/02/2025. Sd/- Sd/- NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR (न्याययकसदस्य /JUDICIAL MEMBER) (लेखाकारसदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 25.02.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. "