K.Financiers Private Limited, Kolkata V. I.T.O Wd - 8(3),Kol., Kolkata

ITA 1276/KOL/2013

• Counselvise Citation: 127623514 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2013
• Court: TRIBUNAL
• Department Lawyers: AMITAVA BHATTACHARJEE
• Assessee Lawyers: SWATI BAID CA LD
• Section: 143(3)

Judgement Text

ITA NO. 1276/KOL/13 SMC JSR M/S.K.FINANCIERS P.LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH: KOLKATA BEFORE HON BLE SRI J SUDHAKAR REDDY , A M I.T.A NO . 1276 /KOL/201 3 A.Y 200 6 - 07 M/S. K. FINANCIERS P VT. LTD V S. ASSESSING OFFICER, W 8(3), KOLKATA PAN: AABCK4739L ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT/ASSESSEE: MISS SWATI BAID, CA , LD.AR FOR THE RESPONDENT/DEPARTMENT : AMITAVA BHATTACHARJEE, JCIT / LD. SR. DR DATE OF HEARING: 17 - 0 8 - 2015 DATE OF PRONOUNCEMENT : 20 - 08 - 201 5 ORDER TH IS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF LD. C IT(A) , KOLKATA IN APPEAL NO. 337 /CIT(A) - VIII/KOL/ 08 - 0 9 DATED 27 - 02 - 2013 . ASSESSMENT WAS FRAMED BY INCOME TAX OFFICER, WA RD 8(3) , KOLKATA FOR THE ASSESSMENT YEAR 200 6 - 07 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 26 - 12 - 2008 . 2. T HE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT , THE LD. CIT(A) HAS ERRED IN CO NFIRMING THE ORDER OF THE AO IN MAKING DISALLOWANCE A CLAIM OF BUSINESS LOSS , AMOUNTING TO RS.8,04,250/ - . 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND DEALS IN PURCHASE AND SALE OF SHARES AND SECURITIES. DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE COMPANY HAS SOLD 4,400 SHARES OF M/S. LIMTEX INVESTMENT LTD @ RS.6.65 PER SHARE AMOUNTING TO RS.29,163/ - . THESE SHARES WERE PURCHASED BY THE ASSESSEE ON 19 - 11 - 2004 ( 2800 SHARES @ RS.186 PER SHARE ) FOR RS.5,20,800/ - AND ON 24.11.2004 (2600 SHARES @ RS.196.10 PER SHARE) FOR RS.5,09,600/ - . IN THE PREVIOUS YEAR RELEVANT TO ASST YEAR 2005 - 06. OUT OF 5400 SHARES , T HE ASSESSEE SOLD 100 0 SHARES ON 28 - 03 - 2005 (ASST YEAR 2005 - 06) AT A PRICE OF RS.9.40 PER SHARE . THE ASSESSEE CARRIED OVER THE BALANCE OF 4400 SHARES TO THE SUBSEQUENT ASST YEAR AS STOCK - IN - TRADE , VALUING THE SAME AT COST PRICE . THE LEARNED AO DISREGARDED THE VALUE OF OPENING STOCK WHICH WAS DONE AT COST PRICE AND TOOK THE VALUE OF THE OPENING STOCK AT NET REALIZABLE VALUE I.E. AT RS.9.40 PER SHARE BEING THE LATEST TRADING PRICE AT THE CLOSE OF THE YEAR , BY RELYING ON THE ITA NO. 1276/KOL/13 SMC JSR M/S.K.FINANCIERS P.LTD 2 ACCOUNTING STANDARD (AS - 13) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) . BESIDES, THE LEARNED AO ALSO FOUND THAT SHARE BROKER AND THE TRADING IN THE SCRIP OF THE STATED COMPANY WERE SUSPENDED BY SEBI , FOR VARIOUS VIOLATI ON OF THE LISTING AGREEMENT AND HELD THAT IT IS CLEAR THAT THE ASSESSEE HAS DONE THIS TRANSACTION TO CREATE LOSS AND THE ASSESSEE HAS MADE SOME JUGGLERY OF ACCOUNTS TO ADJUST THE TAXABLE INCOME WITH THE LOSS IN SHARE TRADING. ACCORDINGLY THE LEARNED AO DISALLOWED THE LOSS OF RS. 8,04,250 CLAIMED IN THE RETURN. 4. AGGRIEVED , A SSESSEE HAS PREFERRED AN APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO BY OBSERVING THAT THE ASSESSEE GENERATED THE LOSS THROUGH MANIPULATION AND PRICE JUGGLERY OF CERTAIN ACCOMMODATIVE ENTRIES TO REDUCE THE INCIDENCE OF TAX. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: - . THE LEARNED CIT(A) ERRED IN LAW AS WELL AS IN FACTS IN UPHOLDING THE DISALLOWANCE OF BUSINESS LOSS AMOUNTING TO RS. 804250.00 ON ACCOUNT OF DEALING OF SHARES. 6 . MISS SWATI BAID, CA, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT A) THE AO ERRONEOUSLY APPLIED THE ACCOUNTING STANDARD (AS - 13) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) FOR THE REASON THAT THIS ACCOUNTING STANDA RD IS TO BE APPLIED FOR INVESTMENT AND NOT FOR STOCK - IN - TRADE . B) THE ASSESSEE HAS BEEN CONSISTENTLY VALUING ITS STOCK - IN - TRADE AT COST PRICE OVER THE YEARS. THIS METHOD OF VALUATION OF CLOSING STOCK HAS BEEN APPROVED BY THE REVENUE . TRADING OF SHAR ES IS REGULATED BY SEBI . D ELISTING OF THE STOCK BY SEBI AND SUSPENSION OF THE BROKER HAD TAKEN PLACE MUCH AFTER THE IMPUGNED ASSESSMENT YEAR. HENCE, IT CANNOT BE A GROUND FOR DISALLOWANCE OF THE LOSS AS NON - GENUINE . 7. SHRI AMITAVA BHATTACHARJE E, JCIT/LD. SR.DR ON THE OTHER HAND SUBMITTED THAT A) A CCOUNTING S TANDARD 13 [AS - 13] STIPULATES THAT THE INVESTMENT SHOULD BE VALUED AT MARKET VALUE. B) THE FACTS DEMONSTRATE THAT THE VALUATION OF THE OPENING STOCK IS HIGHLY INFLATED FOR THE REASON T HAT THE SHARE PRICE WAS R S. 9.40 PER SHARE WHEREAS THE VALUATION OF SHARE WAS AT RS.196.10 PER SHARE B) SEBI HAS DELISTED THE SHARE BROKER AS WELL AS THE SCRIPT. HENCE, THE TRANSACTION ITSELF IS NOT GENUINE. ITA NO. 1276/KOL/13 SMC JSR M/S.K.FINANCIERS P.LTD 3 8. AFTER HEARING THE RIVAL CONTENTIONS , I HOL D THAT THE AO CANNOT RE - VALUE THE OPENING STOCK OF THE ASSESSEE WHEN VALUE OF CLOSING STOCK OF THE ASSESSEE IN THE PREVIOUS YEAR HAS NOT BEEN DISTURBED BY THE REVENUE . THE ASSESSEE HAS BEEN CONSISTENTLY VALUING ITS STOCK AT COST PRICE. THIS METHOD OF V ALUATION HAS NOT BEEN DISTURBED BY THE REVENUE FOR THE PREVIOUS YEARS. AS - 13 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA [ICAI] REFERS TO ACCOUNTING FOR INVESTMENT AND NOT VALUATION OF CLOSING STOCK. RELIANCE PLACED ON AS - 13 BY THE AO IS E RRONEOUS. IF THE VALUATION OF STOCK HAS TO BE DISTURBED, THEN IT SHOULD BE DONE BY RE - VALUING THE CLOSING STOCK AS ON 31/3/2005 FOR A. Y 2005 - 06. ON THIS SOLE GROUND , THE CLAIM OF THE ASSESSEE HAS TO BE ALLOWED. 8.1 IN VIEW OF ABOVE DISCUSSION, WE ALLOW THE APPEAL OF ASSESSEE BY DELETING THE IMPUGNED DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A) 9. IN THE RESULT, THE AP PEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COUR T ON 20 - 08 - 2015 SD/ - DATED : 20 - 08 - 2015 [ J SUDHAKAR REDDY , ACCOUNTANT MEMBER ] *PP /SR.P.S. COPY OF THE ORDER FORWARDED TO: 1. APPEL LANT - M/S. K. FINANCIERS PVT. LTD J. EMBASSY BUILDING 4 SHAKESPEARE SARANI, KOL - 71. 2 RESPONDENT : THE ASSESSING OFFICER, W (3), KOLKATA P - 7 CHOWRINGHEE SQ, KOL - 69. 3 . THE CIT, 4 . THE CIT(A), KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA TRUE CO PY, / BY ORDER A SSTT. REGISTRAR