Shri Hasmukh N. Vora,HUF, Ahmedabad V. The Dy.CIT.,Cent.Circle-1(1), Ahmedabad

CO 295/AHD/2009

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8274 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-01-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AND C O NO AHD
• Assessee Lawyers: ARISING OUT OF
• Keywords: Speculation loss
• Section: 143(3)

Judgement Text

ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO.3202/AHD/2009 (BY REVENUE) AND C.O. NO.295/AHD/2009 (BY ASSESSEE) (ARISING OUT O F ITA NO.3202/AHD/2009) (ASSESS MENT YEAR: 2004-05) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. SHRI HASMUKH N. VORA, (HUF) 304 ANAND CHAMBERS, NR.OLD HIGH COURT RLY CROSSING, AHMEDABAD. (RESPONDENT) PAN: AAAHV 9357F ON BEHALF OF REVENUE: MR.RAHULKUMAR, SR.D. R. ON BEHALF OF ASSESSEE:MR.S.N.SOPARKAR,SR.ADV. ( )/ ORDER DATE OF HEARING : 3 - 1 -2013. DATE OF PRONOUNCEMENT : 15 - 2 -2013 PER: SHRI ANIL CHATURVEDI, A.M. ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 2 IN THIS CASE, APPEAL IS FILED BY THE REVENUE WHERE AS THE CROSS OBJECTION IS FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT (A)-I, .AHMEDABAD DATED 18-9-2009 FOR THE ASSESSMENT YEAR 2004-05. 2. BRIEF FACTS CULLED OUT FROM THE ORDERS ARE AS UN DER:- 3 ASSESSEE IS AN HUF DEALING IN SHARES AND SECURITI ES AND FINANCIAL ACTIVITIES. IT FILED ITS RETURN OF INCOME ON 26-10- 2004 DECLARING TOTAL INCOME OF RS.1,22,250/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 31-10-2006 AND THE INCOME WAS ASSESSED AT RS. 34,26,900/- AFTER MAKING ADDITIONS. ASSESSEE BEING AGGRIEVED BY THE ORDER OF A.O. CARRIED THE MA TTER BEFORE CIT (A). CIT (A) VIDE ORDER DATED 18-9-2009 GRANTED PARTIAL RELI EF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT (A) THE REV ENUE IS NOW IN APPEAL BEFORE US. THE ASSESSEE HAS ALSO FILED CROSS OBJECT ION. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS UNDER:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS I N CONSIDERING THE PURCHASE AND SALE TRANSACTION OF SHARES OF DIVIS LA B AS CONTRIVED LOSS AND ALSO DIRECTED TO TREATED AS SPECULATION LO SS. 2. THE LD. CIT(A) HAS ERRED IN LAW ADDITION ON FACT S IN DELETING THE ADDITION OF RS.1,65,471/- ON ACCOUNT OF PROFIT ON T RANSACTIONS OF 8200 SHARES OF TV TODAY NOT RECORDED IN THE BOOKS OF ACC OUNT. 4. CROSS OBJECTION RAISED BY THE ASSESSEE READS AS UNDER:- 1. IN THE CONTEXT OF ASSESSEES CLAIM FOR LOSS OF RS.31,39,183 IN THE TRADING OF EQUITY SHARES OF DIVIS LAB., THE CIT (A) SHOULD HAVE ALSO HELD SPECIFICALLY THAT IN THE LIGHT OF ITAT SU BSEQUENT DECISION DATED 31-7-2009 IN ASSESSEES OWN CASE FOR THE IMME DIATELY ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 3 PRECEDING YEAR THE REASONS GIVE IN THE IMPUGNED ASS ESSMENT ORDER DATED 31-10-2006 DESERVED TO BE REJECTED AS WHOLLY INVALID. 2. WITHOUT PREJUDICE, TO THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT (A) SHOULD HAVE ALSO SPECIFICALLY HEL D THAT NONE OF THE DECISIONS CITED IN PARAS MARKED 2.5(VIII) AND (X) G O TO SUPPORT VIEW TAKEN IN THE ASSESSMENT ORDER. ITA NO 3202/AHD/2009 (REVENUES APPEAL) GROUND NO.1 IS WITH RESPECT TO THE LOSS ON SALE OF SHARES OF DIVIS LABS LTD. 5. ON SCRUTINY OF THE DETAILS FURNISHED BY THE ASSE SSEE A.O. OBSERVED THAT ASSESSEE HAS INCURRED LOSS OF RS.13,08,973/- F ROM THE TRADING OF 20050 SHARES OF DIVIS LABS LTD. THE AFORESAID LOSS WAS TH E NET LOSS AFTER ADJUSTING PROFIT OF RS.18,30,209/- FROM TRADING OF 9550 SHARE S. HE FURTHER NOTICED THAT ASSESSEE HAD FIRST ENTERED INTO THE SALES TRANSACTI ON AND THE CORRESPONDING PURCHASES WERE MADE SUBSEQUENTLY FURTHER THE ASSESS EE WAS NOT HAVING OPENING STOCK OF THE SHARES. HE FURTHER OBSERVED TH AT THE TRANSACTIONS OF PURCHASE AND SALE WERE DONE BY THE ASSESSEE WITH IT S RELATED PERSON NAMELY PARK LIGHT INVESTMENT P. LTD., THE PURCHASE AND SALE OF SHARES DID NOT APPEAR IN THE DEMAT ACCOUNT OF THE ASSESSEE, TH E TRANSACTION WAS NOT DONE THROUGH STOCK EXCHANGE BUT WERE OFF MARKET TRA NSACTIONS, NO PAYMENT WAS RECEIVED OR MADE BY THE ASSESSEE FOR THE SALE A ND PURCHASE OF SHARES. IN THE LIGHT OF AFORESAID FACTS THE A.O. CO NCLUDED THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE ON LY PAPER TRANSACTION AND THE ASSESSEE HAD JUST BOOKED LOSS. HE ACCORDING LY DISALLOWED THE LOSS OF RS.31,39,183/- WHICH WAS TREATED BY HIM AS A CON TRIVED LOSS. AGGRIEVED BY THE ACTION OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 4 AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND T HE REMAND REPORT RECEIVED FROM A.O., DELETED THE ADDITION MADE BY TH E A.O. BUT HOWEVER TREATED THE SAME AS SPECULATION LOSS BY HOLDING AS UNDER:- 7. IN THE PRESENT CASE I FIND THAT THE A.O. COMPLE TELY MIS-DIRECTED HIMSELF AND CONSIDERED LOSS OF RS.31,39,183/- IN TH E TRANSACTION OF 10,500 SHARES OF DIVIS LAB AS CONTRIVED LOSS AND AD DED TO THE TOTAL INCOME. IN THE PROCESS, THE A.O. FAILED TO CONSIDER THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS TRANSAC TED 20,050 SHARES OF DIVIS LAB ON WHICH IT HAS INCURRED TOTAL LOSS OF RS.13,08,973/-. THE A.O. FAILED TO CONSIDER THAT IN THE TRANSACTIONS OF PURCHASE AND SALES OF SHARES OF DIVIS LAB THE APPELLANT HAS EARNED PRO FIT OF RS.18,30,209/- FROM THE TRADING OF 9550 SHARES AND INCURRED LOSS OF RS.31,39,183/- FROM THE TRADING OF 10,500 SHARES. THE A.O. HAS FAILED TO CONSIDER THAT SHARES WERE SOLD FIRST AND PURCHASED THEREAFTER AND SUCH AN ACTIVITY OF THE APPELLANT IS PERMISSIBL E AND RECOGNIZED NORMAL BUSINESS ACTIVITY IN THE SHARE TRANSACTIONS. AS THE SHARES WERE SOLD FIRST AND PURCHASED THEREAFTER, THEREFORE , THE SAME DOES NOT APPEAR IN THE DEMAT ACCOUNT OF THE APPELLANT. T HE APPELLANT HAS NOT VIOLATED ANY BUSINESS PRACTICE AND IT HAS ENTER ED INTO SHARES PURCHASE AND SALES TRANSACTIONS AS RECOGNIZED BY TH E STOCK EXCHANGES. IT IS ALSO OBSERVED THAT M/S. PARKLIGHT INVESTMENT PVT. LTD. ACTED ONLY AS A BROKER. THE SHARES WERE ACTUALLY SO LD AND PURCHASED, AS EVIDENCED BY THE BILLS, WHICH HAVE BEEN PRODUCED IN THE ASSESSMENT PROCEEDINGS. THE A.O. HAS ALSO FAILED TO CONSIDER THAT THE APPELLANT HAS ACTED AS A PRUDENT BUSINESS MAN W ITH PROFIT MOTIVE IN MIND. IT HAD FIRST SOLD SHARES WITH THE INTENTIO N TO PURCHASE THE SAME WHEN THE PRICES OF SUCH SCRIPS FELL DOWN. HOWE VER, AS PRICE OF SHARES OF DIVIS LAB INCREASED AND THEREFORE, THE AP PELLANT HAD TO PURCHASE THE SAME IN ORDER TO MINIMIZE THE LOSS. 8. IT IS ALSO OBSERVED THAT ON SIMILAR ISSUE, IN TH E CASE OF APPELLANT, APPEAL WAS DECIDED FOR A.Y. 2003-04 BY T HE CIT (A)-III, AHMEDABAD VIDE APPELLATE ORDER DATED 30-3-2007. THE AFOREMENTIONED ORDER OF THE LD. CIT(A)-III, AHMEDAB AD HAS BEEN FURTHER CONFIRMED BY THE HONBLE ITAT, AHMEDABAD (B ENCH-B) IN ITA NO.2521/AHD/2007 ORDER DATED 31-7-2009. ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 5 9. IN VIEW OF ABOVE, THE A.O. IS DIRECTED TO CONSID ER THE PURCHASE AND SALE TRANSACTION OF SHARES OF DIVIS LAB AS NORM AL BUSINESS TRANSACTION AND NOT AS CONTRIVED LOSS. HOWEVER, SIN CE THERE WAS NO CONSEQUENTIAL DELIVERY EFFECTED, THE LOSS OF RS.31, 39,183/- FROM THE AFORESAID TRANSACTION IS DIRECTED TO BE TREATED AS SPECULATION LOSS. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. AGGRIEVED BY THE ORDER OF CIT (A), THE REVENUE N OW IN APPEAL BEFORE US AND THE ASSESSEE IS AGGRIEVED BY THE DECISION OF CIT (A) IN TREATING THE LOSS AS SPECULATION LOSS. 7. BEFORE US, THE LD. D.R. SUBMITTED THAT WHILE DEC IDING THE APPEAL, THE LD. CIT (A) RELIED ON THE ORDER DATED 20-3-2007 OF HIS PREDECESSOR FOR A.Y. 2003-04 AND THE ORDER OF TRIBUNAL IN ITA NO.2521/AH D/2007 DATED 31-7- 2009. HE FURTHER SUBMITTED THAT THE CIT (A) HAS ERR ED IN FOLLOWING THE AFORESAID REASONS AS THE FACT IN THOSE YEARS ARE NO T IDENTICAL TO THAT OF THE YEAR UNDER APPEAL. HE SUBMITTED THAT IN A.Y. 2003-0 4, THE ASSESSEE HAD FIRST PURCHASED THE SHARES AND THEN SOLD THE SHARES WHEREAS IN THE YEAR UNDER APPEAL, THE ASSESSEE HAD FIRST SOLD THE SHARE S AND SUBSEQUENTLY PURCHASED THE SHARES. HE FURTHER SUBMITTED THAT THE ASSESSEE DID NOT FURNISH THE DETAILS CALLED FOR BY THE A.O. DESPITE ADEQUATE OPPORTUNITIES BEING GRANTED BY A.O. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD DELIBERATELY AVOIDED THE NOTICES ISSUED BY THE A.O. HE THEREFORE URGED THAT IN VIEW OF THE AFORESAID FACTS, THE ORDER OF THE A. O. BE UPHELD. 8. ON THE OTHER HAND THE LD. A.R. SUBMITTED THAT TH E COPIES OF BILLS WERE SUBMITTED BEFORE THE A.O. HE FURTHER SUBMITTED THAT THE FACTS OF THE CASE IN ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 6 A.Y. 2003-04 ARE IDENTICAL TO THAT OF THE YEAR UNDE R APPEAL AND THE VIEW TAKEN BY HONBLE ITAT BE FOLLOWED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL POSITION THAT EMERGES IS THAT THE ASSESSEE HAD ENTERED INTO TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF DIVIS LABS LTD., A COMPANY LISTED ON THE STOCK EXCHANGE. THE TRANSACTI ONS OF SALES WERE ENTERED BEFORE THE CORRESPONDING PURCHASE TRANSACTI ONS AND WITHOUT ANY EXISTING STOCK BEING AVAILABLE WITH ASSESSEE. IN TH E PROCESS OF SALE AND PURCHASE OF SHARES THE ASSESSEE IS REPORTED TO HAVE INCURRED NET LOSS. THE TRANSACTIONS OF PURCHASE AND SALE WERE OFF MARKET T RANSACTIONS AND NOT ROUTED THROUGH THE STOCK EXCHANGE. CIT (A) HAS OBSE RVED THAT THE ACTIVITY OF FIRST SELLING AND THEN PURCHASING THE SHARES TO BE A PERMISSIBLE AND NORMAL BUSINESS ACTIVITY IN SHARE TRANSACTIONS, FUR THER THE PURCHASE AND SELL OF SHARES WERE EVIDENCED BY PURCHASE AND SALES BILL S WHICH WERE PRODUCED DURING THE ASSESSMENT PROCEEDINGS. THE SHARES WERE SOLD FIRST WITH THE INTENTION TO PURCHASE THE SAME WHEN ITS PRICES FELL DOWN BUT SINCE THE PRICE OF SHARES INCREASED, THE ASSESSEE HAD TO PURCHASE T HE SHARES TO MINIMIZE THE LOSS. IN VIEW OF THESE FACTS, THE CIT (A) HAS H ELD THE LOSS OF RS.31,39,183/- TO BE A SPECULATION LOSS AND NOT A C ONTRIVED LOSS. THESE FACTS HAVE NOT BEEN CONTROVERTED BY REVENUE BY BRIN GING ANY MATERIAL ON RECORD. IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT (A) AND WE THUS UPHOLD HIS ORDER ON THIS GRO UND. THUS THIS GROUND OF REVENUE IS DISMISSED. ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 7 SECOND GROUND IS WITH RESPECT TO PROFIT OF RS.1,65, 471/- ON SALE OF SHARES OF TV TODAY. 10. A.O. ON PERUSAL OF THE DEMAT ACCOUNT OBSERVED T HAT ASSESSEE HAD PURCHASED 24600 SHARES OF TV TODAY ON 19-1-2004 AND SOLD THE SAME ON 20-1-2004. HE FURTHER OBSERVED THAT IN THE TRADING ACCOUNT WHICH WAS SUBMITTED BY THE ASSESSEE, ASSESSEE HAD PURCHASED A ND SOLD 16400 SHARES OF TV TODAY. A.O. ASKED THE ASSESSEE TO CLAR IFY THE DISCREPANCY. WITH RESPECT TO THE DISCREPANCY IN QUANTITY OF SALE S IN BOTH THE STATEMENTS, ASSESSEE SUBMITTED THAT SHARES WERE PURCHASED BY HA SMUKH VORA IN INDIVIDUAL CAPACITY BUT BY MISTAKE THE DELIVERY WAS GIVEN IN THE DEMAT ACCOUNT OF HUF. A. O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. HE WAS OF THE VIEW THAT THE TRANSACTION OF 8200 SHARES (24600 LESS 16400) WERE DONE OUT OF THE BOOKS AND THE SAME WAS NOT DIS CLOSED IN THE RETURN OF INCOME. HE ACCORDINGLY WORKED OUT THE PROFIT AT RS.1,65,471/- AND ADDED TO THE INCOME OF ASSESSEE. AGGRIEVED BY THE ACTION OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 12. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. I FIND THAT SHRI HASMUKH N.VORA (INDL.) HAS PURCHASED 8,200 SHA RES OF TV TODAY ON 19-01-2004 AND SAME HAS BEEN DULY ACCOUNTE D IN THE ACCOUNTS OF HASMUKH N. VORA (INDL.). THE APPELLANT HAS ALSO FURNISHED COPY OF ACCOUNT OF SHRI HASMUKH N. VORA ( INDL.) FROM THE BOOKS OF BROKER H. NYALCHAND FINANCIAL SERVICES LTD . THE PAYMENT HAS ALSO BEEN MADE FROM THE ACCOUNT OF SHRI HASMUKH N.VORA (INDL.). THIS FACT IS ALSO REFLECTED IN THE RETURN OF INCOME OF SHRI HASMUKH N.VORA (INDL.) FOR A.Y. 2004-05. AS SUCH, T HERE IS NO CASE OF ANY ADDITION OF RS.1,65,471/- ON THIS SCORE AND THE SAME IS DIRECTED TO BE DELETED. ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 8 11. AGGRIEVED BY THE ORDER OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. 12. BEFORE US, THE LD. D.R. SUPPORTED THE ORDER OF A.O. AND ON THE OTHER HAD THE LD. A.R. SUPPORTED THE ORDER OF CIT (A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT WHILE DELETING THE ADDITION, C IT (A) HAS GIVEN A FINDING THAT THE PURCHASE OF 8200 SHARES OF TV TODAY WAS AC COUNTED IN THE INDIVIDUAL ACCOUNT OF HASMUKH VORA, THE PAYMENT OF SHARES HAVE BEEN MADE FROM THE ACCOUNT OF HASMUKH VORA AND THE SAME IS ALSO REFLECTED IN THE RETURN OF INCOME OF HASMUKH VORA FOR A.Y. 2004- 05 IN HIS INDIVIDUAL CAPACITY. THESE FACTS HAVE NOT BEEN CONTROVERTED BY REVENUE BY BRINGING ANY CONTRARY MATERIAL ON RECORD. WE THUS FIND NO RE ASON TO INTERFERE WITH THE ORDER OF CIT (A). WE THUS UPHOLD HIS ORDER ON T HIS GROUND. THUS THIS GROUND OF THE REVENUE IS DISMISSED. 14. THUS THE APPEAL OF THE REVENUE IS DISMISSED. 15. THE C.O. FILED BY THE ASSESSEE WAS NOT SERIOUSL Y CONTESTED BY THE LD. A.R. AND THEREFORE THE SAME IS DISMISSED. ITA NO3202/A HD/2009 WITH C.O. NO.295/AHD/2009. . ASSESSMENT Y EAR 2004-05 . 9 16. THUS APPEAL OF THE REVENUE AND THE C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 15 - 2 - 201 3. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) I, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD 1.DATE OF DICTATION 4-1 -2013 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 8 / 1 / 2013 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 10 - 1 -2013. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2013 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2013 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2013. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER