B. M. Consultant Pvt. Ltd., Kolkata V. ITO, WD-11(4), KOLKATA, Kolkata

ITA 1339/KOL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3111 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 1997-1998
• Appeal Filed On: 12-06-2014
• Court: TRIBUNAL
• Department Lawyers: SITAL CHANDRA DAS
• Assessee Lawyers: K K CHAPARIA
• Keywords: Opportunity of being heard; Speculation loss; Reason to believe
• Section: 147; 68; 148

Judgement Text

ITA NO.1339/KOL/2014-B.M.CONSULTANTS PVT.LTD. A.Y. 1997-98 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BE NCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO.1339/KOL/201 4 ASSESSMENT YEAR : 1997-9 8 B.M.CONSULTANT PVT. LTD. -VS.- I.T.O., W ARD-11(4), KOLKATA KOLKATA (PANAABCB 0283C) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI K.K.CHAPARIA, FCA FOR THE RESPONDENT : SHRI SITAL CHANDRA DAS, JCIT, SR.DR DATE OF HEARING : 22.01.2016. DATE OF PRONOUNCEMENT : 03.02.2016. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 21.03.2014 OF CIT(A)-XXXVI, KOLKATA, RELATING TO AY 1997-98. 2. IN THE FIRST THREE GROUNDS THE ASSESSEE HAS CHALLENGED THE VALIDITY OF INITIATION OF RE-ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. THE A SSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT. THE ASSESSE E FILED RETURN OF INCOME FOR A.Y.1996-97 DECLARING TOTAL INCOME AT RS.2,890/- AN D NOTICE U/S 148 WAS ISSUED ON 17.03.2004. THE REASONS RECORDED BY THE AO FOR ISSU ING NOTICE U/S 148 OF THE ACT ARE SET OUT IN PAGE 15 OF THE MAIN ORDER OF CIT(A) WHIC H ARE AS FOLLOWS :- ASST. YEAR :1997-98 REASON FOR RE-OPENING THE ASSESSMENT FROM THE PROFIT AND LOSS ACCOUNT FILED BY THE ASSES SEE COMPANY ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 IT IS FOUND THAT THE ASSESSEE INCURRED LOSS IN SHARE DEALING AS FOLLOWS : PROFIT AND LOSS ACCOUNT (SHARE DEALING) DRCR. TO OPEN STOCK 36,52,340 BY SALES 25,96,430/- CLOSING STOCK 8,63,040 NET LOSS 1,92,870/- 36,52,340/- 36,52,340/- THE LOSS OF RS.1,92,870/- COMPUTED AS ABOVE HAS BEE N SET OFF AGAINST INTEREST INCOME OF RS.2,55,735/- AND THUS RESULTANT PROFIT AS PER PROF IT AND LOSS ACCOUNT WAS ONLY OF RS.2,885/-. ITA NO.1339/KOL/2014-B.M.CONSULTANTS PVT.LTD. A.Y. 1997-98 2 UNDER EXPLANATION BELOW SECTION 73 OF THE IT ACT, 1 961 WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN A COMPANY WHOSE GROSS TOTA L INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND INCOME FROM OTHER SOURCES) OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OF THE GRANTING OF LOANS AND ADVANCES CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHE R COMPANIES SUCH COMPANY SHALL FOR THE PURPOSE OF THIS SECTION, BE DEEMED TO BE CARRYI NG ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHA SE AND SALE OF SUCH SHARES. IN THIS CASE THERE WAS NO INCOME UNDER ANY OTHER HE AD EXCEPTING UNDER THE HEAD INCOME FROM BUSINESS. KEEPING IN VIEW THE EXPLANATION BEL OW SECTION 73 THE LOSS FROM PURCHASE AND SALE OF SHARES OF RS.1,92,870/- PLUS T HE PROPORTIONATE EXPENSES OF RS.24,903/- (57,903/- X 1,92,870/-) I.E. TOTAL OF 2,17,773/- IN THIS CASE SHOULD BE TR EATED 4,48,605/- AS SPECULATION LOSS WHICH IS NOT TO BE ALLOWED IN C OMPUTING TOTAL INCOME OF THE ASSESSEE BUT TO BE CARRIED FORWARD AND WILL BE SET OFF AGAIN ST ANY FUTURE SPECULATION PROFIT. I, HAVE, THEREFORE, REASON TO BELIEVE THAT IN COME TO THE EXTENT OF RS.2,17,773/- FOR THE A.Y.1997-98 HAS ESCAPED ASSESSMENT WITHIN THE M EANING OF SECTION 147 OF THE IT ACT, 1961. HENCE, PROCEEDINGS U/S 147 HAVE BEEN INITIATE D. THIS WAS CONFRONTED THE ASSESSEE, DURING THE COURSE OF ASSESSMENT. HOWEVER, NO COMPLIANCE BE GIVEN BY THE ASSESSEE. AS THE AOS CO MPUTATION SPECULATION LOSS FROM SHARE TRADING IS FOUND TO BE REASONABLE AND CORRECT , THE ADDITION MADE IS SUSTAINED AND THE APPEAL ON THIS GROUND IS DISMISSED. 2.1. PERUSAL OF THE ABOVE REASONS RECORDED BY THE AO, CLEARLY SHOWS THAT AO HAD LOOKED INTO THE PROFIT AND LOSS ACCOUNT FILED BEFOR E THE AO AND NOTICED THAT THERE WAS A LOSS IN SHARE TRADING OF RS.1,92,870/- WHICH WAS SET OFF THE INTEREST INCOME OF RS.2,55,735/-. SINCE THE ASSESSEE IS A COMPANY AND EXPLANATION BELOW 73 PROVIDES THAT LOSS INCURRED BY A COMPANY IN PURCHASE AND SAL E OF SHARES OF OTHER COMPANIES SHALL BE CONSIDERED AS SPECULATION LOSS, THE AO CAM E TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME IN AS MUCH AS THE LOSS ON SALE OF SHARES OUGHT NOT TO HAVE BEEN SET OFF AGAINST INTEREST INCOME OF THE ASSESSEE. TH E ASSESSEES ASSESSMENT FOR AY 97- 98 HAD NOT BEEN COMPLETED U/S.143(3) OF THE ACT. I N MY OPINION THE REASONS RECORDED BY THE AO WAS SUFFICIENT TO INITIATE PROCEEDINGS U/ S 147 OF THE ACT. I ACCORDINGLY DISMISS GROUND NOS. 1 TO 3 RAISED BY THE ASSESSEE. 3. GROUND NO.6 WAS NOT PRESSED AND THE REMAIN ING GROUNDS THAT NEED ADJUDICATION ARE GROUND NO.S 4 AND 5 WHICH READ AS FOLLOWS :- 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION UNDER SECTION 73 O F THE INCOME TAX ACT, 1961 ITA NO.1339/KOL/2014-B.M.CONSULTANTS PVT.LTD. A.Y. 1997-98 3 AMOUNTING TO RS.2,17,773/- BY TREATING THE LOSS IN SHARE DEALING AS SPECULATION LOSS SINCE THE DEEMING PROVISION IN EXPLANATION BELOW SE CTION 73 WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER. 5. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.8,30,000/- UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. THE LEARNED CIT(A) HAS ERRED IN CONFIRMI NG THE ACTION OF THE LEARNED ASSESSING OFFICER. 4. IN RESPECT OF THE AFORESAID TWO GROUNDS I F IND THAT THE CIT(A) AFTER HEARING THE SUBMISSIONS OF THE ASSESSEE HAD CALLED FOR A REMAND REPORT FROM THE AO. THE REMAND REPORT WAS NOT CONFRONTED TO THE ASSESSEE. IT IS A PLEA OF THE ASSESSEE BEFORE ME IN RESPECT OF GROUND NO.5 THE ASSESSEE HAD COME TO KNO W THE OBJECTION OF THE AO IN THE REMAND REPORT WHICH IS EXTRACTED IN PARA 5.3. OF TH E CIT(A)S ORDER. ACCORDING TO THE AO THE ASSESSEE FAILED TO EXPLAIN AS TO WHY THE CHE QUE NUMBER GIVEN BY THE ASSESSEE FOR HAVING RECEIVED PAYMENT THOROUGH BANKING CHANNE L DID NOT TALLY WITH THE BANK STATEMENT. ACCORDING TO THE ASSESSEE IT CAME TO KNO W ABOUT THIS FACT ONLY AFTER READING THE CONCLUSIONS DRAWN BY THE CIT(A) IN THE IMPUGNED ORDER AFTER THE RECEIPT OF THE ORDER OF CIT(A). AS FAR AS GROUND NO. 4 IS CONCERNE D IT HAS BEEN THE PLEA OF THE ASSESSEE THAT HIS PRINCIPAL BUSINESS WAS OF GRANTIN G LOANS AND ADVANCES AND THEREFORE HE WAS OUTSIDE THE PURVIEW OF EXPLANATION TO SECTIO N 73 OF THE ACT. EVEN THE SUBMISSIONS OF THE ASSESSEE WAS NOT PROPERLY ADDRES SED BY THE CIT(A). IN THE GIVEN FACTS AND CIRCUMSTANCES I AM OF THE VIEW THAT IT WO ULD BE JUST AND PROPER TO SET ASIDE THE ORDER OF CT(A) AND REMAND THE ISSUE RAISED BY T HE ASSESSEE IN GROUND NOS 4 AND 5 TO THE AO FOR FRESH CONSIDERATION IN ACCORDANCE WIT H LAW. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE S ET ASIDE PROCEEDINGS. 5. IN THE RESULT FOR STATISTICAL PURPOSE THE AP PEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 03.02.2016. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 03.02.2016. [RG PS] ITA NO.1339/KOL/2014-B.M.CONSULTANTS PVT.LTD. A.Y. 1997-98 4 COPY OF THE ORDER FORWARDED TO: 1.B.M.CONSULTANT PRIVATE LIMITED, CHHAPARIA & ASSOC IATES, CHARTERED ACCOUNTANTS, 8, CAMAC STREET, SHANTINIKETAN BUILDING, 5 TH FLOOR, ROOM NO.2, KOLKATA-700017. 2. ITO, WARD-11(4), KOLKATA. 3. CIT(A)-XXXVI, KOLKATA 4. CIT-14,KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER A SSTT.REGISTRAR, ITAT, KOLKATA BENCHES