Bhansali Fiscal Services Pvt.Ltd., Ahmedabad V. The Income Tax Officer,Ward-1(2), Ahmedabad

ITA 1316/AHD/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7878 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: P B PARMAR
• Keywords: Business income; Depreciation; Speculation loss; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 43(5)

Judgement Text

ITA NO. 1316/AHD/2014 BHANSALI FISCAL SERVICES PVT LTD VS. ITO ASSESSMENT YEAR: 2005-06 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR, AM AND MS. MADHUMITA ROY, JM] ITA NO. 1316/AHD/2014 ASSESSMENT YEAR: 2005-06 BHANSALI FISCAL SERVICES PVT LTD ............ ......APPELLANT 27, 1 ST FLOOR, NEW CLOTH MARKET, O/S RAIPUR GATE, AHMEDABAD-380001 [PAN : AAACB 6168 M] VS. INCOME TAX OFFICER ...........................RESPONDENT WARD-1(2), AHMEDABAD APPEARANCES BY: TUSHAR HEMANI & PB PARMAR, FOR THE APPELLANT SAURABH SINGH, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 22.06.2018 DATE OF PRONOUNCING THE ORDER : 18.09.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 25 TH FEBRUARY 2014 PASSED BY THE LEARNED CIT(A)-6, AHME DABAD IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S . 147 OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2005-06. 2. THE GRIEVANCES RAISED BY THE APPELLANT ARE AS FO LLOWS:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN REOPENING THE ASSESSMENT OF THE APPELLANT UNDER SECTION147 OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REOPENING IS WITHOUT JURISDICTION AND THUS ILLEGAL. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN FRAMING THE IMPUGNED ASSESS MENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT ON THE GROUND WHICH IS COMPLE TELY DIFFERENT THAN THE GROUND ON WHICH THE REASSESSMENT IS INITIATED. UNDE R THE CIRCUMSTANCES, THE REASSESSMENT ORDER ITSELF IS BAD IN LAW AND MAY KIN DLY BE QUASHED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN NOT ALLOWING SET OFF OF BROUGHT FORWARD ITA NO. 1316/AHD/2014 BHANSALI FISCAL SERVICES PVT LTD VS. ITO ASSESSMENT YEAR: 2005-06 PAGE 2 OF 4 BUSINESS LOSS AGAINST CURRENT YEAR'S BUSINESS PROFI TS. IN THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, THE BROUGHT FORW ARD LOSSES SHOULD HAVE BEEN ALLOWED TO SET OFF AGAINST THE PRESENT YEAR IN COME. 4. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING AND GROSSLY IGNORING VARIOUS SUBMISSIO NS, EXPLANATIONS AND INFORMATION SUBMITTED AND THE CASE LAWS RELIED ON B Y THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN CHARGING INTEREST U /S 234A/B/C/D OF THE ACT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT.' 3. TO ADJUDICATE ON THIS APPEAL ONLY A FEW MATERI AL FACTS NEED TO BE TAKEN NOTE OF. THIS IS A CASE OF REOPENED ASSESSMENT. WHILE REOPENING THE ASSESSMENT, THE ASSESSING OFFICER RECORDED THE OBSERVATIONS AS FOLL OWS:- IN THIS CASE, THE ASSESSES COMPANY HAD FILED E-FI LED RETURN OF INCOME FOR THE ABOVE ASSESSMENT YEAR ON 27.10.2005 DECLARING TOTAL INCOME OF RS.NIL AFTER CLAIMING SET-OFF OF BROUGHT FORWARD BUSINESS LOSS / UNABSORBED DEPRECIATION OF EARLIER YEARS. THE RETURN SO FILED WAS PROCESSED U/ S. 143(1) OF THE I.T. ACT. THEREAFTER, SCRUTINY ASSESSMENT U/S.143(3) OF THE A CT WAS COMPLETED ON 30.11.2007, ASSESSING THE NET INCOME AT RS. NIL AFT ER SETTING OFF OF SPECULATION LOSS/UNABSORBED DEPRECIATION OF A.Y.199 7-98, 1999-00 AND A.Y. 2001-02 ETC. TOTALING AT RS. 42,00,460/- AGAINST BU SINESS INCOME. ON VERIFICATION OF RECORDS, IT IS NOTICED THAT DURI NG THE PREVIOUS YEAR RELEVANT TO A.Y.2005-06, THE ASSESSES COMPANY WAS ENGAGED IN TH E BUSINESS OF TRADING OF SHARE AND CHEQUE DISCOUNTING. THE SO CALLED BUSI NESS LOSSES OF EARLIER YEARS WHICH WERE ACTUALLY LOSSES OF SPECULATIVE BUS INESS TO THE EXTENT OF RS.42,00,460/- PERTAINING TO THE A.YS. 1997-98, 199 9-00 AND A.Y. 2001-02 ETC. WERE WRONGLY ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME FOR THE A.Y. 2005-06 WITHOUT TAKING IN TO CONSIDERATION OF THE EXPLANATION TO SECTION 73 OF THE IT ACT. IN VIEW OF THE EXPLANATION IN SE CTION 73 OF THE ACT, THE LOSS INCURRED ON TRADING OF SHARES BY THE ASSESSEE COMPA NY WAS SPECULATION LOSS. THUS, THE SAID LOSS WAS IN THE NATURE OF SPECULATIO N LOSS AND NOT BUSINESS LOSS AND HENCE ASSESSEE-COMPANY WAS NOT ENTITLED TO SET OFF SUCH SPECULATION LOSS AGAINST ANY OF THE INCOME. THE INCOME EARNED BY THE ASSESSEE COMPANY WAS CHARG EABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND WAS NOT SPEC ULATIVE INCOME AS PER DEFINITION IN SECTION 43(5) OF THE ACT. SINCE DURIN G THE PREVIOUS YEAR UNDER CONSIDERATION THE SPECULATION BUSINESS HAS BEEN REF LECTED IN BOOK OF ACCOUNT OF ASSESSEE AS A DISTINCT AND SEPARATE FROM OTHER B USINESS AS PER EXPLANATION BELOW RULE 28, THE SPECULATION LOSS OF RS. 42,00,460/- OF CURRENT YEAR ALLOWED TO CARRY FORWARD TO SUBSEQUENT YEARS W AS NOT IN ORDER. ITA NO. 1316/AHD/2014 BHANSALI FISCAL SERVICES PVT LTD VS. ITO ASSESSMENT YEAR: 2005-06 PAGE 3 OF 4 HOWEVER, THE SET OFF OF SPECULATION LOSS / UNABSORB ED DEPRECIATION OF A.Y. 2001-02 AND A.Y. 2002-03 ETC. AGAINST THE BUSINESS INCOME OF THE ASSESSMENT YEAR UNDER REPORT DETERMINED OF RS.42,00 ,460/- WAS NOT IN ORDER. THIS RESULTED UNDER ASSESSMENT OF BUSINESS INCOME T O THE EXTENT OF RS.42,00,460/-. IN VIEW OF ABOVE, IT IS THEREFORE CONCLUDED THAT TH E ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR ASSESSMENT. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE COMPANY TO THE ABOVE EXTENT OF RS.42,00,460/- HAS ESCAPED ASSE SSMENT. THE CASE IS THEREFORE, REQUIRED TO BE REOPENED U/S. 147 OF THE I.T. ACT. 4. AGGRIEVED, INTER ALIA, BY THE SAID REOPENING, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SU CCESS. THE PLEA OF THE ASSESSEE, INTER ALIA, WAS THAT IN THE REASONS SO RE CORDED, NO LAPSES ON THE PART OF THE ASSESSEE HAVE BEEN POINTED OUT; AND, SINCE THE ASSESSMENT SOUGHT TO BE REOPENED IS BEYOND FOUR YEARS, UNLESS THERE IS LAPS E ON THE PART OF THE ASSESSEE, THE COMPLETED ASSESSMENT CANNOT BE REOPENED. ONE OF THE POINTS RAISED BY THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE REASONS FOR REOPENING, AS EVIDENT FROM THE REASONS RECORDED ABOVE, WAS THAT THE BUSINESS LOSSE S OF THE EARLIER YEARS WHICH WAS LOSS OF SPECULATIVE BUSINESS COULD NOT BE SET OFF A GAINST THE BUSINESS INCOME FOR THE PRESENT YEAR IN THE LIGHT OF EXPLANATION TO SECTION 73 OF THE ACT. HOWEVER, WHILE FRAMING THE REASSESSMENT, THE ASSESSING OFFICER HAD DISCARDED THAT STAND AND PROCEEDED TO DISALLOW THE LOSSES ON THE GROUND THAT THE ASSESSEES CHEQUE DISCOUNTING BUSINESS WAS DISCONTINUED IN ASSESSMENT YEAR 2002-03 AND, FOR THAT REASON, SET OFF OF BROUGHT FORWARD LOSSES PERTAININ G TO SUCH DISCONTINUED BUSINESS COULD NOT BE SET OFF AGAINST THE BUSINESS INCOME OF THE PRESENT YEAR. THIS PLEA WAS REJECTED BY THE LD. CIT(A) BY OBSERVING AS FOLLOWS: - (III) THAT THE RE-OPENING WAS ON A DIFFERENT ISS UE AND THE ORDER WAS PASSED ON ANOTHER ISSUE. AS SEEN FROM THE REASONS RECORDED FOR THE REOPENING ASSESSMENT REPRODUCED ABOVE, THE REOPENING WAS DONE ON THE GROUND THAT TH E BROUGHT FORWARD SPECULATION LOSSES OF EARLIER YEARS WERE WRONGLY SE T OFF AGAINST THE BUSINESS INCOME OF THE YEAR UNDER CONSIDERATION. AS SEEN FRO M THE ASSESSMENT ORDER U/S 143(3) R.W.S 147, THE SET OFF BROUGHT FORWARD O F LOSSES WAS MODIFIED. IN OTHER WORDS THE ORDER WAS PASSED PRECISELY ON THE S AME ISSUE ON WHICH THE ASSESSMENT WAS REOPENED. HENCE, THIS CONTENTION OF THE APPELLANT IS FACTUALLY INCORRECT AND IS DEVOID OF MERIT. 5. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPE AL BEFORE US. 6. WE FIND THAT, AS RIGHTLY POINTED OUT BY THE LEAR NED COUNSEL, THE REASON FOR WHICH THE ASSESSMENT IS REOPENED IS ALTOGETHER DIFF ERENT FROM THE STAND TAKEN BY THE ASSESSING OFFICER IN THE IMPUGNED REASSESSMENT ORDE R. WHILE THE ASSESSMENT WAS REOPENED ON THE GROUND THAT THE CARRIED FORWARD LOS SES WERE WRONGLY SET OFF AGAINST THE BUSINESS INCOME WITHOUT TAKING IN TO ACCOUNT TH E EXPLANATION TO SECTION 73 OF THE ACT, IN THE ASSESSMENT, SET OFF WAS DECLINED FOR TH E REASON THAT CHEQUE DISCOUNTING BUSINESS ITSELF WAS DISCONTINUED IN THE ASSESSMENT YEAR 2002-03. IT IS INDEED TRUE THAT BOTH THESE ISSUES RELATE TO THE SET OFF OF CAR RIED FORWARDED LOSSES BUT THEN THE ITA NO. 1316/AHD/2014 BHANSALI FISCAL SERVICES PVT LTD VS. ITO ASSESSMENT YEAR: 2005-06 PAGE 4 OF 4 NATURE OF STAND AND THE REASONS FOR DECLINING THE S ET OFF ARE ALTOGETHER DIFFERENT. SUCH A COURSE OF ACTION IS NOT PERMISSIBLE IN THE L IGHT OF HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF CIT VS. MOHMED JUND ED DADANI, (2013) 355 ITR 172. IN ANY CASE, THE REASONS RECORDED FOR REOPENI NG THE ASSESSMENT DO NOT POINT OUT ANY LAPSE ON THE PART OF THE ASSESSEE. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDE RED VIEW THAT THE IMPUGNED REASSESSMENT IS VITIATED IN LAW AND ACCORDINGLY WE QUASH THE REASSESSMENT PROCEEDINGS. THE REASONS FOR WHICH THE REASSESSMEN T PROCEEDINGS WERE VITIATED HAVE NOT FOUND FAVOUR WITH THE ASSESSING OFFICER EV EN AT THE ASSESSMENT STAGE, AS SUCH THE VERY FOUNDATION OF REOPENING OF THE ASSESS MENT IS VITIATED IN LAW. ACCORDINGLY, THE REASSESSMENT STANDS QUASHED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 18 TH SEPTEMBER, 2018 SD/- SD/- MS. MADHUMITA ROY PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 18 TH DAY OF SEPTEMBER, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ...18.09.2018............... .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ...18.09.2018... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 18.09.2018.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .18.09.2018. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : . .18.09.2018 . 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......