ITO,Ward-9(3), Kolkata, Kolkata V. M/s. Parrot Agencies & Credited(P)Ltd, Kolkata

ITA 1079/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99793 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 28-08-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 20-07-2012
• Court: TRIBUNAL
• Department Lawyers: AMITABH CHAUDHURI
• Keywords: Business income; Opportunity of being heard; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM ] ITA NO.1079 /KOL/2012 ASSESSMENT YEAR : 1997 - 98 ( A PPELLANT ) (RESPONDENT) I.T.O., WARD - 9(3) - VERSUS - M/S. PAR ROT AGENCIES & CREDITED KOLKATA PRIVATE LTD., KOLKATA (PAN: AABCP6800F) FOR THE APPELLANT : SHRI AMITABH CHAUDHURI, ADDL.CIT FOR THE RESPONDENT : SHRI SANJAY BAJORIA, FCA DATE OF HEARING : 25 .08 .2015. DATE OF PRONOUNCEMENT : 16.09.2015. ORDE R PER SHRI M.BALAGANESH, AM 1. THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORDER OF THE LEARNED CITA IN APPEAL NO. 105/CIT(A) - II/KOL/2000 - 01 DATED 18.05.2012 FOR THE ASST YEAR 1997 - 98 ARISING OUT OF THE ORDER OF THE LEARNED ASSESSING OFFICER FRAM ED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS THAT AS TO WHETHER THE LEARNED CITA IS CORRECT IN NOT TREATING THE LOSS ON SHARE TRADING OF RS. 12,21,80/ - AS SPECUL ATION LOSS IN VIEW OF THE PROVISIONS OF SECTION 73 OF THE ACT. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE HAD CLAIMED LOSS ON SHARE TRADING OF RS. 12,21,800/ - IN ITS RETURN WHICH WAS TREATED AS SPECULATION LOSS BY THE LEARNED AO BY STATI NG THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND BY APPLYING THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. ON FIRST APPEAL, THE LEARNED CIT(A) DIRECTED THE LEARNED AO NOT TO TREAT THE SHARE TRADING LOSS OF RS. 12,21,800/ - AS SPECULATION LOSS. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: - ITA NO. 1079/KOL/2012 M/S. PARROT AGENCIES & CREDITED PVT.LTD. A.YR. 1997 - 98 2 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN HOLDING THAT THE FACT OF THE CASE DOES FALL WITHIN THE PURVIEW OF THE EXCEPTION CARVED OUT IN THE EXPLANATION TO SECTION 73 OF THE ACT, 1961 IN SPITE OF THE FACT THAT THE JURISDICTIONAL HIGH COURT HELD IN THE CASE OF M/S. EASTERN AVIATION & INDUSTRIES LTD. VS. CIT THAT BOTH POSITIVE AND NEGATIVE PROFITS ARE O F A REVENUE CHARACTER AND BOTH MUST ENTER INTO COMPUTATION, WHEREVER IT BECOMES MATERIAL, IN THE SAME MODE OF THE TAXABLE INCOME OF THE ASSESSEE. 2.2. SHRI. AMITABH CHOUDHURI, THE LEARNED DR ARGUED ON BEHALF OF THE REVENUE AND SHRI. SANJAY BAJORIA, FCA, THE LEARNED AR ARGUED ON BEHALF OF THE ASSESSEE. 2.3 THE LEARNED DR ARGUED THAT EXPLANATION TO SECTION 73 OF THE ACT IS VERY MUCH APPLICABLE TO THE ASSESSEE AND ACCORDINGLY HE SUPPORTED THE ORDERS OF THE LEARNED AO THAT THE SHARE TRADING LOSS SHO ULD BE CONSTRUED ONLY AS SPECULATION LOSS. IN RESPONSE TO THIS, THE LEARNED AR ARGUED THAT ASSESSEE IS AN INVESTMENT COMPANY AND ACCORDINGLY THE PRINCIPAL ACTIVITY OF THE COMPANY ITSELF IS TRADING IN SHARES AND MOREOVER THE PREDOMINANT INCOME IN THIS CAS E IS INCOME FROM OTHER SOURCES AND ON THIS COUNT ITSELF, THE EXPLANATION TO SECTION 73 OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE. HE FURTHER ARGUED THAT IN SIMILAR CIRCUMSTANCES FOR THE EARLIER ASST YEAR 1996 - 97, THE LEARNED AO HAD ACCEPTED SUCH LOSS A S REGULAR BUSINESS LOSS AND NOT TREATED AS SPECULATION LOSS. THERE IS ABSOLUTELY NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND ACCORDINGLY PLEADED FOR UPHOLDING THE ORDER OF THE LEARNED CITA. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. IT IS SEEN FROM THE BALANCE SHEET AS ON 31.3.97 OF THE ASSESSEE WHICH IS FILED AT PAGE 19 OF PAPER BOOK OF THE ASSESSEE , THAT THE ASSESSEE HAD SHOWN A SUM OF RS. 30,17,190/ - AS STOCK IN TRADE UNDER CURRENT ASSET S AND FURTHER IN THE NOTES ON ACCOUNTS WHICH IS AT PAGE 20 OF THE PAPER BOOK , THE COMPLETE MOVEMENT OF SHARES IN RESPECT OF OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK OF SHARES ARE MENTIONED WITH QUANTITATIVE DETAILS THEREON WHICH IS IN CONSONANCE WITH THE OBJECTS OF THE ASSESSEE BEING AN INVESTMENT COMPANY. WE FIND THAT THE FINDING GIVEN BY THE LEARNED CITA AT PAGE 6 OF HIS ORDER THAT DURING THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD HIGHER INCOME FROM OTHER SOURCES AS COMPARED TO THE INCO ME FROM THE HEAD PROFITS ITA NO. 1079/KOL/2012 M/S. PARROT AGENCIES & CREDITED PVT.LTD. A.YR. 1997 - 98 3 AND GAINS FROM BUSINESS IS CORRECT. THIS FACT IS NOT REFUTED BY THE REVENUE. WE ALSO FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE BY THE ORDER OF THIS TRIBUNAL IN ITA NOS. 1511 & 1512 / KOL / 2011 DATED 18.6.2013 FOR THE ASST YEARS 2005 - 06 & 2006 - 07 RESPECTIVELY, WHEREIN IT WAS HELD AS FOLLOWS: - 5.2. BEING AGGRIEVED THE REVENUE HAS FILED THIS APPEAL. THE LD.DR HAS RELIED ON THE ORDER OF THE AO AND THE LD. AR OF THE ASSESSEE HAS SUPPO RTED THE ORDER OF THE LD. CIT(A). WE FIND THAT NO SPECIFIC ERROR IN THE ORDER OF THE LD. CIT(A) COULD BE POINTED OUT BY THE LD. DR. WE FIND THAT SECTION 73 DOES NOT PERMIT THE REVENUE TO COMPARE THE ASSESSEE S INCOME BRANCH WISE OR OFFICE WISE. THE ENTIRE INCOME OF THE ASSESSEE COMPUTED HEAD WISE AS PER THE PROVISIONS OF THE ACT IS TO BE COMPARED TO CONSIDER THE APPLICABILITY TO SECTION 73 OF THE ACT OR OTHERWISE. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT ON SO COMPARING BY TAKING INTO CONSIDERATION TH E ENTIRE INCOME OF THE ASSESSEE PROVISIONS OF SECTION 73 OF THE ACT IS NOT ATTRACTED IN THE CASE OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE R EVENUE FOR BOTH THE YEARS UNDER CONSIDERATION ARE DISMISSED. WE ALSO FIND THAT THE ISSUE IS ALSO COVERED BY THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS MIDDLETON INVESTMENT & TRADING CO. LTD IN ITA NO. 196 OF 1999 DATED 15.1.2014 WHICH IN TURN RELIED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS DARSHAN SECURITIES (P) LTD REPORTED IN 341 ITR 556 (BOM). WE FIND THAT THE INTENTION BEHIND PROVISIONS OF SECTION 73 IS ONLY TO PROHIBIT THE SETTING OFF OF A LOSS WHICH HAS RESULTED F ROM A SPECULATION BUSINESS, SAVE AND EXCEPT AGAINST THE PROFITS AND GAINS OF ANOTHER SPECULATION BUSINESS. FURTHER IN ORDER TO DETERMINE WHETHER THE EXCEPTION THAT IS CARVED OUT BY THE EXPLANATION APPLIES TO THE FACTS OF THIS CASE, WE HOLD THAT THE LEGIS LATURE HAS FIRST MANDATED THE COMPUTATION OF GROSS TOTAL INCOME OF ASSESSEE. THE WORDS CONSISTS MAINLY IN EXPLANATION TO SECTION 73 ARE INDICATIVE OF THE FACT THAT THE LEGISLATURE HAD IN ITS CONTEMPLATION THAT THE GROSS TOTAL INCOME CONSISTS PREDOMINANT LY OF INCOME FROM THE FOUR HEADS THAT ARE REFERRED TO THEREIN. HENCE IN COMPUTING THE GROSS TOTAL INCOME, THE NORMAL PROVISIONS OF THE ACT MUST BE APPLIED AND IT IS ONLY THEREAFTER, THAT IT HAS TO BE DETERMINED AS TO WHETHER THE GROSS TOTAL INCOME SO COM PUTED CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS REFERRED TO IN THE EXPLANATION. THE GROSS TOTAL INCOME HAS TO BE COMPUTED BY COMPUTING THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS INCLUDING THE BUSINESS INCOME FROM COMMISSI ON OF RS. 9,48,852/ - AND LOSS FROM SHARE TRADING OF RS. ITA NO. 1079/KOL/2012 M/S. PARROT AGENCIES & CREDITED PVT.LTD. A.YR. 1997 - 98 4 12,21,800/ - FOR THE SIMPLE REASON THAT BOTH BEING SOURCES UNDER THE SAME HEAD. THE ASSESSEE ALSO HAD REPORTED INCOME FROM OTHER SOURCES OF RS. 2,77,572/ - . HENCE WE FIND LOT OF FORCE IN THE ARGUME NTS OF THE LEARNED AR THAT THE COMPARISON SHOULD BE DONE HEAD WISE AND NOT SOURCE WISE. ACCORDINGLY WE HOLD THAT THE FACTS OF THE CASE OF THE ASSESSEE SQUARELY FALLS WITHIN THE PURVIEW OF THE EXCEPTION CARVED OUT IN THE EXPLANATION TO SECTION 73 OF THE AC T AND CONSEQUENTLY WE HOLD THAT THE ASSESSEE WOULD NOT BE DEEMED TO BE CARRYING ON SPECULATIVE BUSINESS. THE CASE LAW RELIED UPON BY THE REVENUE IS DISTINGUISHABLE FROM THE FACTS OF THE INSTANT CASE. WE ALSO FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S THAKORLAL HIRALAL EXPORTS PVT LTD VS ITO IN ITA NO. 903 / KOL /2010 FOR ASST YEAR 2004 - 05 DATED 19.12.2014. IN VIEW OF THE CLEAR PROVISIONS OF THE ACT AND IN VIEW OF THE FACTS OF THE CASE AND THE JUDICIAL PRECEDENTS RELIED UPON INCLUDING THE JURISDICTIONAL HIGH COURT DECISION AND COORDINATE BENCH OF TRIBUNAL DECISION, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT ( A ) ON THIS GROUND. ACCORDINGLY, THE GROUND N O.1 RAISED BY THE REVENUE IS DISMISSED. 3. THE FINAL ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LEARNED CITA IS CORRECT IN DELETING THE ADDITION MADE IN THE SUM OF RS. 1,36,000/ - TOWARDS UNEXPLAINED CASH DEPOSIT. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE MADE THE CASH DEPOSITS ON THE FOLLOWING DATES : - 13.5.96 4,000 16 . 5 . 96 85,000 22 . 5 . 96 22,000 30 . 11 . 96 25,000 1,36,000 THE LEARNED AO BROUGHT TO TAX THE SAME AS INCOME OF THE ASSESSEE AS NO EVIDENCE WAS FURNISHED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. ON FIRST APPEAL, THE LEARNED CITA DELETED THIS ADDITION BY ACCEPTING TO THE PLEA OF THE ASSESSEE THAT IT HAD BROUGHT FORWARD CASH BALANCE FROM ASST YEAR 1996 - 97 WHICH COULD BE VERIFIED FROM THE BALANCE SHEET AVAILABLE WITH THE LEA RNED AO. THE LEARNED CIT ( A ) FOUND THAT THE ITA NO. 1079/KOL/2012 M/S. PARROT AGENCIES & CREDITED PVT.LTD. A.YR. 1997 - 98 5 CASH BALANCE AVAILABLE WITH THE ASSESSEE AS ON 31.3.96 WAS RS. 1,81,332.73 WHICH SATISFACTORILY EXPLAINS THE CASH DEPOSITS MADE IN THE ASSESSMENT YEAR UNDER APPEAL. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: - 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN ACCEPTING THAT BROUGHT FORWARD CASH BALANCE OF LAST YEAR HAS BEEN DEPOSITED INTO BANK ACCOUNT WHEREAS NEITHER THE BOOKS OF ACCOUNTS NOR THE CASH FLOW STATEMENT HAS BEEN VERIFIED EITHER BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDING OR BY THE LD. CIT(APPEALS) AT APPEAL STAGE. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT I S SEEN FROM THE BALANCE SHEET AS ON 31.3.96 OF THE ASSESSEE WHICH IS FILED AT PAGE 42 OF THE PAPER BOOK OF THE ASSESSEE THAT THE ASSESSEE WAS INDEED HAVING CASH BALANCE OF RS. 1,81,332.73. BUT THAT DOES NOT AUTOMATICALLY MEAN THAT IT HAD SUFFICIENT CASH B ALANCES AS PER BOOKS ON THE DATE OF DEPOSIT ON EACH DATE AS MENTIONED SUPRA. HENCE IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DEEM IT FIT AND APPROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO VERIFY THE CASH BOOK ON THE RESPECTIVE DAT ES TO ASCERTAIN THE AVAILABILITY OF CASH BALANCE AS PER BOOKS TO EXPLAIN THE CASH DEPOSITS AND DECIDE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNC ED IN TH E COURT ON 11.09.2015. SD/ - SD/ - [MAHAVIR SINGH] [M.BALA G ANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 11.09.2015. R.G.(.P.S.) ITA NO. 1079/KOL/2012 M/S. PARROT AGENCIES & CREDITED PVT.LTD. A.YR. 1997 - 98 6 COPY OF THE ORDER FORWARDED TO : 1 . M/S. PARROT AGENCIES & CREDITED PVT. LTD., 33/1, N.S.ROAD, ROOM NO.821, MARSHAL HOUSE, KOLKATA - 700001. 2 THE I.T.O. , WARD - 9(3), KOLKATA. 3 . THE CIT - I II , KOLKATA , 4. THE CIT(A) - VI I I, KOLKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES