M/s Hans Steel Private Limited , Bangalore V. Income TAx Officer Ward-3(1)(3), Bangalore

ITA 1074/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7641 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR
• Assessee Lawyers: NINGOJI RAO
• Keywords: Source of fund
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, B ENGALURU BEFORE S HRI N.V.VASUDEVAN , JUDICIAL MEMBER AND SHRI A.K. GARODIA , ACCOUNTANT MEMBER I TA NO. 1074 / BANG/2 0 1 8 (ASSESSMENT YEAR: 2010 - 11 ) M/S. HANS STEEL PVT.LTD., NO.44/4, 18 TH CROSS, 4 TH MAIN, MALLESWARAM, BENGALURU - 560 055. PAN:AAACH 4631 F VS. APPELLANT DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 11(4), BENGALURU. RESPONDENT APPELLANT BY : SHRI NINGOJI RAO, CA. RESPONDENT BY : SHRI P.DHIVAHAR, ADDL.CIT(DR). DATE OF HEARING : 09/07/2018 DATE OF PRONOUNCEMENT : 2 0 / 07/2018 O R D E R PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 19/03/2018 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - 3, [CIT(A)], RELATING TO ASSESSMENT YEAR 2010 - 11. THE ONLY GRIEVANCE OF THE ASSESSEE PROJECTED IN THE GROUNDS OF APPEAL IS WITH REGARD TO DISALLOWANCE OF EXPENDITURE TO THE TUNE OF RS.6,84,140/ - WHILE COMPUTING THE TOT AL INCOME OF THE ASSESSEE. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DERIVING INCOME FROM RENDERING AGENCY AND CONSULTATION SERVICES AND INCOME FROM OTHER SOURCES. FOR ASSESSMENT YEAR 2010 - 11, THE ASSESSEE FILED RETURN OF INCOME DECLARING TO TAL INCOME OF RS.6,13,390/ - . THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE IS ITA NO . 1074 /BANG/20 18 PAGE 2 OF 6 AT PAGE 7 OF THE ASSESSEE S PAPER BOOK. IT IS NOT DISPUTED THAT THE ASSESSEE HAD INCOME UNDER THREE HEADS VIZ., (I) NON - SPECULATIVE BUSINESS (II) SPECULATIVE BUSINESS AND (II I) INCOME FROM OTHER SOURCES. AS FAR AS SPECULATION INCOME IS CONCERNED, THE ASSESSEE COMPUTED THE SAME BY CONSIDERING EXPENSES RELATABLE TO THAT BUSINESS AND ARRIVED AT INCOME OF RS.5,17,320/ - . THE ASSESSEE HAD COMMON PROFIT AND LOSS ACCOUNT WHEREIN ALL EXPENSES AND INCOME HAD BEEN RECORDED. W HILE CALCULATING INCOME FROM NON - SPECULATION AND OTHER SOURCES AND FROM SPECULATIVE BUSINESS, THE ASSESSEE HAD ALLOCATED EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT IN THE FOLLOWING MANNER: THE TOTAL EXPENSES DEBITED IN THE P&L ACCOUNT WAS A SUM OF RS.7,29,301.85 (PAGE 17 OF THE PAPER BOOK) . IN T HE COMPUTATION OF TOTAL INCOME (PAGE 7 OF THE PAPER BOOK) THE ASSESSEE HAD DISALLOWED EXPENSES TO THE EXTENT OF RS.36,555/ - BEING TOWARDS CHARITY AND BOGUS. THUS, TH E EXPENSES TO BE APPORTIONED BETWEEN SPECULATION AND NON - SPECULATION INCOME WAS A SUM OF RS.6,92,747/ - AND THIS WAS APPORTIONED BY THE ASSESSEE IN THE MANNER SET OUT IN THE CHART GIVEN ABOVE. 3. THE ASSESSING OFFICER (AO), AFTER NOTICING THE FACT THAT THE ASSESSEE HAD TWO SOURCES OF INCOME VIZ., SPECULATION BUSINESS AS WELL AS NON - SPECULATION BUSINESS, PROCEEDED TO DISALLOW EXPENSES TO THE TUNE OF RS.7,29,301/ - . T HE ASSESSEE HAD SHOWN A SUM OF RS.17,500/ - AS INCOME FROM NON - SPECULATION BUSINESS. THE ASSES SEE COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE THE SOURCES OF NON - SPECULATION INCOME VIZ., INCOME FROM RENDERING CONSULTANCY SERVICE FOR WHICH THE ASSESSEE RECEIVED A SUM OF ITA NO . 1074 /BANG/20 18 PAGE 3 OF 6 RS.1,75,000/ - . THE AO, THEREFORE, GAVE THE FOLLOWING REASONS FOR DISALLOWING EXPENSES TO THE TUNE OF RS.7,29,301/ - : 4. AGGRIEVED BY THE AFORESAID ADDITION MADE BY THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE ASSESSEE HAD FILED EVIDENCE TO SHOW SOURCES OF SPECULATIVE INCOME HEDGING INCOME FROM M/S.ANAND RATHI COMMODITIES LTD., IT WA S CONTENDED BEFORE THE CIT(A) THAT WHILE COMPUTING INCOME FROM SPECULATION, THE ASSESSEE HAS ALLOCATED RS.5,17,320/ - AGAINST INCOME FROM SPECULATION BUSINESS TOWARDS EXPENSES. IT WAS ALSO POINTED OUT THAT AS AGAINST NON - SPECULATI VE INCOME OF RS.17,500/ - IT HAD CLAIMED EXPENDITURE OF RS.7,543/ - . THE ASSESSEE POINTED OUT THAT THE DISALLOWANCE OF ENTIRE EXPENSES OF RS.7,29,301/ - DEBITED IN THE P&L ACCOUNT WAS THEREFORE ERRONEOUS . E VEN ASSUMING THAT THE SOURCE OF NON - SPECULATIVE BUS INESS INCOME , WAS NOT PROVED BY THE ASSESSEE, THE DISALLOWANCE CAN AT BEST TO RS.7,543/ - . THE ASSESSEE POINTED OUT THAT IT HAD FILED ALL EVIDENCE WITH REGARD TO SPECULATION BUSINESS CARRIED OUT BY EH ASSESSEE IN THE FORM OF TRADING IN COMMODITIES ITA NO . 1074 /BANG/20 18 PAGE 4 OF 6 SEGMENT. THE RELEVANT CONTRACT NOTES AND THE LEDGER ACCOUNT AND STATEMENT OF ACCOUNT OF THE BROKER M/S.ANAND RATHI COMMODITIES IS AT PAGES 35 TO 75 AND 7 9 OF THE ASSESSEE S PAPER BOOK. THE CIT(A), HOWEVER, CONFIRMED THE ORDER OF THE AO BUT DELETED ADDITION OF R S.36,555/ - WHICH WERE EXPENSES DISALLOWED BY THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME FOR THE FOLLOWING REASONS ASSIGNED BY THE CIT(A) IN PARAS.4.5 TO 5.7: ITA NO . 1074 /BANG/20 18 PAGE 5 OF 6 5. IT CAN BE SEEN FROM THE ORDER OF THE CIT( A) THAT HE HAS IGNORED THE SUBMISSION OF THE ASSESSEE THAT RS.5,17,320/ - WAS EXPENDITURE CLAIMED AGAINST SPECULATIVE INCOME FOR WHICH EVIDENCE WAS FILED BEFORE AO/CIT(A). AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS. ON PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE, IT IS EVIDENT THAT THE ASSESSEE HAD FILED ALL THE EVIDENCE OF CONTRACTS WITH M/S.ANAND RATHI COMMODITIES BEFORE THE AO. IT IS SEEN FROM PAGES 33 & 3 4 OF THE ASSESSEE S PAPER BOOK THAT THE ASSESSEE, IN RESPONSE TO NOTICE U/S 143(2) OF THE I NCOME - TAX ACT,1961 [THE ACT] DATED 09/09/2011 AND THE LETTER OF THE AO DATED 16/01/2012 , THE ASSESSEE HAS FILED AS ANNEX URE F LEDGER ACCOUNT OF THE BROKER AS M/ S.ANAND RATHI COMMODITIES INCLUDING CONTRACT NOTES OF VARIOUS TRANSACTIONS. THESE ARE AT PAGES 35 TO 75 AND 79 OF THE ASSESSEE S PAPER BOOK. IN FACT, THE ASSESSEE HAS ALSO FILED AN APPLICATION U/S 154 OF THE ACT BEFORE THE CIT(A) OBJECTING TO THE OBSERVA TIONS OF THE CIT(A) IN THE IMPUGNED ORDER THAT THE ASSESSEE HAD NOT PRODUCED COPIES OF CONTRACT NOTICE ISSUED BY THE BROKER M/S.ANAND RATHI COMMODITIES LTD., THE ASSESSEE HAS SPECIFICALLY DRAWN ATTENTION OF THE CIT(A) TO THE FACTS AS STATED ABOVE THAT EVI DENCE WAS FILED BEFORE THE AO. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE AND THE ISSUE WITH REGARD TO EXPENSES, IF ANY, TO BE DISALLOWED BE ITA NO . 1074 /BANG/20 18 PAGE 6 OF 6 REMANDED TO THE AO FOR FRESH CONSIDERATION IN THE LIGHT OF THE EVID ENCE POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US. THE AO SHALL, AFFORD AN OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPO SES. O R DER PRONOUNCED IN THE OPEN COURT ON 20 TH JU LY 2018 S D/ - SD/ - ( A.K. GARODIA ) ( N.V.VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU. D A T E D : 20 / 0 7 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE