V.M.STAR, MUMBAI V. ACIT - 16(3), MUMBAI

ITA 1238/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3333 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2014
• Court: TRIBUNAL
• Assessee Lawyers: K SIVARAM
• Keywords: Business income; Valuation report
• Section: 143(3)

Judgement Text

, , F, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1238/MUM/2014 ASSESSMENT YEAR: 2011-12 V.M. STAR DW 6310, BHARAT DIAMOND BOURSE, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400051 / VS. AC IT - 16 (3) MATRU MANDIR, TRADEO ROAD. MUMBAI -400007 (ASSESSEE ) (REVEN UE) P.A. NO. AAAFV5448H ITA NO.2504/MUM/2014 ASSESSMENT YEAR: 2011-12 ACIT - 16(3) MATRU MANDIR, TRADEO ROAD. MUMBAI -400007 / VS. V.M. STAR DW 6310, BHARAT DIAMOND BOURSE, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400051 (REVENUE) ( RESPONDENT) P.A. NO. AAAFV5448H / ASSESSEE BY SHRI K. SIVARAM (AR) / REVENUE BY SHRI G.M. DOSS (DR) ! ' / DATE OF HEARING : 06/01/2016 V.M. STAR 2 ! ' / DATE OF ORDER: 20/01/2016 / O R D E R PER BENCH: THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF IN COME TAX (APPEALS)-27, MUMBAI {(IN SHORT CIT(A)}, DATED 15 .01.2014 FOR THE ASSESSMENT YEAR 2011-12, PASSED AGAINST THE ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER (IN SHORT AO ) U/S 143(3) OF THE ACT. FIRST WE TAKE ASSESSEES APPEAL ITA NO.1238/M/2014 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L: 1. THE LEARNED CIT(A) ERRED IN NOT TAKING THE VALU E OF STOCK AS PER SECOND VALUATION REPORT SUBMITTED OF VALUER SHRI SHARAD MEHTA AT RS.5,41,93,485/-. WHEREAS THE LEARNED CIT(A) AS TAKEN THE VALUE AS PE R SHRI DINESH SALVI REPORT AT RS. 8,51,67,748/-. 2. WITHOUT PREJUDICE ID. CIT (A) FAILED TO CONSIDER THAT VALUE AS PER DINESH SALVI'S REPORT AT RS. 8,51,67,748/- I S THE MARKET VALUE AND HAS TO GIVE ADHOC ALLOWANCES FOR DIFFERENCES IN VALUATIONS SINCE THE VALUATION IS SUBJECTIVE. 3. WITHOUT PREJUDICE THE ID. CIT(A) ERRED IN NOT GI VING CONSEQUENTIAL EFFECT AS TO ALLOWING THE BUSINESS LO SS OF RS.3,09,52,303/- AS THE VALUE OF TOTAL STOCK IS TAK EN AS V.M. STAR 3 PER VALUATION REPORT OF SHRI DINESH SALVI AT RS.8,51,67,748/- 3. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI K. SIVARAM, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI G.M. DOSS, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 4. THE ISSUE INVOLVED IN ALL THE GROUNDS IS COMMON. T HE ASSESSEE HAS CHALLENGED THE ACTION OF LOWER AUTHORI TIES IN ADOPTING THE VALUE OF STOCK FOUND DURING THE SEARCH AT RS.8,51,67,745/- AS AGAINST A SUM OF RS.5,41,93,485 /-. THE ASSESSEE HAS ALSO CONTENDED THAT THE LOWER AUTHORIT IES HAVE ERRED IN NOT GRANTING THE BENEFIT OF BUSINESS LOSS OF RS.3,09,52,303/-, INCURRED BY THE ASSESSEE ON ACCOU NT OF SALE OF THE AFORESAID STOCK. 4.1. THE BRIEF FACTS ARE THAT THE ASSESSEE IS A PARTNER SHIP FIRM ENGAGED IN THE BUSINESS OF TRADING EXPORTS OF DIAMO NDS. A SEARCH ACTION HAD TAKEN PLACE AT THE PREMISES OF TH E ASSESSEE, WHEREIN INTER ALIA STOCK OF DIAMONDS WAS FOUND BY THE SEARCH TEAM. PHYSICAL VERIFICATION OF THE STOCK OF DIAMOND WAS TAKEN AND THE SAME WAS VALUED BY THE GOVERNMENT APPROVED VALUER. TOTAL STOCK OF THE DIAMONDS FOUND WAS RS. 16772.32 CARATS, BUT THE STOCK OF DIAMONDS AS PER BOOKS AS ON DATE O F SEARCH I.E. 13 TH JULY 2010 WAS ONLY RS.3113.60 CARETS. THE DEPARTMENT VALUED FOR AN AGGREGATE AMOUNT OF RS. V.M. STAR 4 8,51,67,745/-. BUT THE ASSESSEE CLAIMED THAT THE VA LUE OF THE SAID DIAMONDS WAS RS.5,41,93,485/-. 4.2. BEING AGGRIEVED, THE ASSESSEE CONTESTED THE MATTER BEFORE THE LD. CIT(A), WHERE PART RELIEF WAS GIVEN. BUT, T HE ASSESSEE WAS NOT SATISFIED AND THE APPEAL WAS FILED BEFORE T HE TRIBUNAL. 4.3. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSE L HAS CONTESTED THE ACTION OF LOWER AUTHORITIES IN NOT AC CEPTING THE VALUE OF STOCK AS CLAIMED BY THE ASSESSEE. IT HAS F URTHER BEEN SUBMITTED THAT, WITHOUT PREJUDICE TO GROUND NOS. 1 & 2, THE ASSESSEE CHALLENGED IN GROUND NO.3, THE ACTION OF L OWER AUTHORITIES IN NOT GRANTING A BENEFIT OF BUSINESS L OSS INCURRED BY THE ASSESSEE ON ACCOUNT OF SALE OF AFORESAID STO CK AMOUNTING TO RS.3,09,52,303/-. IT HAS BEEN FURTHER SUBMITTED BY THE ASSESSEE THAT SUBMISSIONS IN THIS REGARD WER E MADE BEFORE THE AO AS WELL AS LD. CIT(A), BUT THE THIS C ONTENTION HAS NOT BEEN MET BY LD. CIT(A), AND NO DISCUSSION HAS B EEN MADE IN THE APPELLATE ORDER PASSED BY THE LD. CIT(A) IN REGARD TO BUSINESS LOSS OF RS.3,09,52,303/-. IT HAS BEEN FURT HER SUBMITTED THAT COMPLETE DOCUMENTARY EVIDENCES HAVE BEEN SUBMITTED EVIDENCING SALE OF 100% STOCK BY THE ASSE SSEE. DURING THE YEAR ITSELF, NOTHING HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES TO NEGATE THE CLAIM OF THE AS SESSEE AND THUS, SALE HAS BEEN FOUND TO BE GENUINE. ON THE OTH ER HAND LD. DR HAS NOT CONTROVERTED FACTUAL SUBMISSIONS MAD E BY THE ASSESSEE. V.M. STAR 5 4.4. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITI ES AND CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY BOTH T HE SIDES. WITHOUT GOING MUCH DEEPER INTO THE WHOLE CONTROVERS Y RAISED BEFORE US, IT IS NOTED BY US, AT THE VERY OUTSET, T HAT FACTS WITH RESPECT TO SALE OF 100% OF THE AFORESAID STOCK AND INCURRING OF BUSINESS LOSS OF RS.3,09,52,303/- WAS RAISED BY THE ASSESSEE BEFORE LD. CIT(A) ALSO. THE RELEVANT PART FROM THE WRITTEN SUBMISSIONS OF THE ASSESSEE FILED BEFORE THE LD. CI T(A) AS HAS BEEN REPRODUCED IN ITS ORDER BY THE LD. CIT(A) IS R EPRODUCED BELOW: 4.1.10. WITHOUT PREJUDICE TO ABOVE GROUNDS, THE LE ARNED ASSESSING OFFICER HAS FAILED TO ALLOW THE BUSINESS LOSS OF RS.3,09,52,303/-, IF THE VALUE OF TOTAL SHOCK IS TA KEN AS PER VALUATION REPORT OF DINESH SALVI AT RS.8,51,67, 745/-. 4.1.12. THE APPELLANT HAS DISPOSED OFF ALL THE 100% STOCK (ACCOUNTED AS WELL AS UNACCOUNTED) TILL THE END OF THE RELEVANT FINANCIAL YEAR I.E. 2010-11. HENCE, THE RE DRAFTED PROFIT AND LOSS ACCOUNT OF THE APPELLANT WHICH IS W ORKED OUT BY SUBSTITUTING THE COST OF THE BOOK STOCK AT M ARKET PRICE OF THE BOOK STOCK AS TAKEN IN THE VALUATION R EPORT BY DINESH SALVI IS TO BE ACCEPTED AND THE BUSINESS LOS S OF RS.3,09,52,303/- ARISING AFTER TAKING THE VALUE OF BOOKS STOCK AS PER DINESH SALVI REPORT IS TO BE SET OFF A GAINST THE BUSINESS INCOME ADDED IN THE ASSESSMENT ORDER UNDER SECTION 72 OF THE INCOME TAX ACT, 1961. V.M. STAR 6 4.5. WE HAVE NOTED FROM THE PERUSAL OF THE ORDER PASSED BY THE LD. CIT(A) THAT THESE CONTENTIONS HAVE NOT BEEN DEALT WITH BY EITHER OF THE AUTHORITIES, AND NO DISCUSSION AT ALL HAS BEEN MADE BY AO OR BY LD. CIT(A) IN THEIR ORDERS ON THIS ISSUE. THUS, AS REQUESTED BY BOTH THE PARTIES JOINTLY, WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE AO. THE ASSESSEE SHALL FURNISH COMPLETE DOCUMENTARY EVIDENC ES BEFORE THE AO EVIDENCING SALE OF THE AFORESAID STOCK AND I NCURRING BY OF THE CONSEQUENT LOSS THERE-UPON, FOR WHICH THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. TH E ASSESSEE SHALL EXTEND REQUISITE COOPERATION TO THE AO FOR AS CERTAINING CORRECT FACTS, BY FURNISHING INFORMATION AND DOCUME NTS AS MAY BE REQUIRED BY THE AO, AS PER LAW. THUS, WITH T HESE DIRECTIONS, THIS ISSUE IS SENT BACK TO THE FILE OF THE AO FOR VERIFICATION OF THESE FACTS AND IF THESE FACTS ARE FOUND TO BE CORRECT, THEN THE AFORESAID CLAIM OF LOSS SHOULD BE ALLOWED TO THE ASSESSEE. AS PER THE LAW AND FACTS, THE AO SHAL L DECIDE THE WHOLE ISSUE AFRESH WITHOUT BEING INFLUENCED BY THE EARLIER ORDERS PASSED BY HIM OR BY LD. CIT(A) AND AFTER TAK ING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES AND ALL THE LEGAL AND FACTUAL ISSUES AS MAY BE RAISED BY THE ASSESSEE BEF ORE THE AO. THUS, WITH THESE DIRECTIONS, THIS GROUND IS SENT BA CK TO THE FILE OF THE AO AND IS TREATED AS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. V.M. STAR 7 NOW, WE TAKE ITA NO.2504/MUM/2015 REVENUES APPEAL 5. IN THE GROUNDS RAISED BY THE REVENUE BEFORE US, IT HAS BEEN CONTENDED THAT THE LD. CIT(A) HAS ERRED IN SUSTAINI NG THE ADDITION ONLY TO THE EXTENT OF RS.1.19 CRORES OUT O F ADDITION OF RS.3.60 CRORES MADE BY THE AO IN RESPECT OF VALUE O F UNACCOUNTED STOCK FOUND DURING THE COURSE OF SEARCH . IT HAS BEEN CONTENDED BY THE LD. COUNSEL THAT A BILL DATED 08.06.2010 FOUND DURING THE COURSE OF SEARCH WAS NO T ENTERED IN THE BOOKS OF ACCOUNTS. THE AO DENIED THE CLAIM O F THE ASSESSEE. BUT LD. CIT(A) AFTER VERIFICATION OF FACT S ALLOWED THE CLAIM. ON THE OTHER HAND, LD. DR, SUBMITTED THAT CO MPLETE FACTS HAVE NOT BEEN SUBMITTED BY THE ASSESSEE AND T HIS ISSUE ALSO REQUIRE RE-EXAMINATION ON THE SAME PATTERN AS THE ISSUES RAISED BY THE ASSESSEE IN ITS APPEAL. 5.1 WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES IN THIS REGARD. IT IS NOTED BY US THAT ISSUES RAISE D BY THE ASSESSEE IN ITS APPEAL HAVE BEEN SENT BACK TO THE F ILE OF THE AO FOR RE-ADJUDICATION, THEREFORE, IN PURSUANCE TO THE REQUEST AND AS PER AGREEMENT CONVEYED BY BOTH THE PARTIES DURIN G THE COURSE OF HEARING, ISSUES RAISED BY REVENUE IN ITS APPEAL ARE ALSO SENT BACK TO THE FILE OF THE AO. THE AO SHALL RE-ADJUDICATE THIS ISSUE AND AFTER EXAMINING THE CLAIM OF THE ASS ESSEE SHALL DECIDE THE SAME AFRESH IN RESPECT OF OUR DIRECTIONS AS HAVE BEEN GIVEN IN THE APPEAL FILED BY THE ASSESSEE. V.M. STAR 8 6. IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL AS R EVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2016. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER MUMBAI; $ DATED : 20/01/2016 CTX? P.S/. .. %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. & '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. + + , ( & ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI 5. /0 ) 1 , + &' 12 , / DR, ITAT, MUMBAI 6. 3 4 / GUARD FILE. / BY ORDER, * /& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI