Subhash Wadilal Shah, Satara V. Deputy Commissioner of Income-tax,

ITA 1377/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1510 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 23-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Unexplained cash credit; Principle of natural justice; Speculation loss
• Section: 43(5); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.1377/PN/2016 / ASSESSMENT YEAR : 2002-03 SUBHASH WADILAL SHAH, 16, SHANIWAR PETH, KARAD, SATARA 415 110 PAN NO. AFFPS2612J . / APPELLANT V/S DCIT, SATARA CIRCLE, SATARA . / RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / RESPONDENT BY : SHRI ANIL CHAWARE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21-03-2016 OF THE CIT(A)-4, PUNE RELATING T O THE ASSESSMENT YEAR 2002-03. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N L AW , THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN REOPENING T HE CASE U/S 147 OF THE INCOME TAX ACT , 1961 AS THE ISSUE REFERRED IN THE REASONS WAS DEBATABLE . THEREFORE , ENTIRE PROCEEDINGS U/S 147 OF THE INCOME TAX ACT , 1961 IS BAD IN LAW AND NEEDS TO BE DELETED . 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT (APPEALS) HAS ERRED IN PRESUMING THAT THE APPEL L ANT HAS NOT PRESSED OTHER GROUNDS OF APPEAL BY IGNORING THE FA CT THAT ASSESSEE VIDE ITS SUBMISS I ON DT . 07/03/2016 HAS GIVEN ELABORATE WRITTEN SUBMISSION WHEREIN YOUR APPELLANT HAS PRESSED ALL THE GRO UNDS AND THEREFORE SUCH PRESUMPTION IS NOT WA RR ANTED . HENCE , GROUND NO.3 & 4 ROSE BEFORE CIT (APPEALS) NEEDS ADJUDICATION . WITHOUT PREJUDICE TO THE ABOVE , FOLLOWING SPECIFIC GROUNDS ARE TAKEN ON MERIT , / DATE OF HEARING :27.07.2016 / DATE OF PRONOUNCEMENT:29.07.2016 2 ITA NO.1377/PN/2016 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT (APPEALS) HAS ERRED IN ESTIMATING ACCRUED INTEREST OF RS. 3,60 , 000/- ON STICKY L OAN/ADVANCE GIVEN TO , ONE MR . PD . MAHAJAN . THE INTEREST IS NOT ACCRUED FOR THE REASON THAT THE PRINCI PLE AMOUNT ITSELF IS UNRECOVERABLE AND THEREFORE BY APPLYING THE PRINC IPLES OF REVENUE RECOGNITION , INTEREST CANNOT BE SAID TO HAVE BEEN ACCRUED . WITHOUT PREJUDICE TO GROUND NO.2 , AND ASSUMING WITHOUT ADMITTING IF ANY INTEREST HAS TO BE CHARGED AS ACCRUED , IN SUCH CASE IT MAY BE HELD THAT IT SHALL BE CHARGEABLE ONLY IN RESPECT OF NET AM OUNT AFTER DEDUCTING RS . 14 , 50 , 000/- ON WHICH ASSESSEE HAS NOT CLAIMED ANY INTEREST . 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT (APPEALS) HAS ERRED IN MAKING ADHOC DISALL OWANCES OF RS . 15 , 000/- BEING 15 % OF FOLLOWING EXPENSES , I. TELEPHONE EXPENSES RS.61,618/- II. TRAVELLING EXPENSES RS.16,618/- III. CAR EXPENSES RS.1,485/- IV. SHOP EXPENSES RS.20,616/- THESE DISALLOWANCES ARE MADE BY PRESUMING THAT THERE MI GHT BE AN ELEMENT OF PERSONAL NATURE . SUCH PRESUMPTION IS NOT SUPPORTED BY ANY EVIDENCE AND THE R EFORE DISALLOWANCES MADE NEEDS TO BE DELETED . THE APPELLANT CRAVES FOR TO LEAVE , ADD , ALTER , MODIFY , DELETE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME HEARING , IN THE INTEREST OF NATURAL JUSTICE . 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 18-09-2001 DECLA RING TOTAL INCOME OF RS.60,000/-. SUBSEQUENTLY, IN RESPONSE TO NOTICE U/S.148 THE ASSESSEE FILED HIS RETURN OF INCOME ON 12-02-2 007 DECLARING TOTAL INCOME OF RS.10,16,022/-. THE AO COMPLETED T HE ASSESSMENT U/S.143(3)/147 ON 16-08-2007 DETERMINING THE TOTAL INCOME AT RS.18,52,210/-. IN THE SAID RETURN THE AO HAD MADE THE FOLLOWING ADDITIONS : ADD: 1. DISALLOWANCE ON ACCOUNT OF GUR TRADING ACCOUNT AS DISCUSSED IN PARA 2.8 RS.3,61,188/- 2. ADDITION ON ACCOUNT OF INTEREST ON STICKY LOANS/ADVANCES AS DISCUSSED IN PARA 3.7 RS.3,60,000/- 3 ITA NO.1377/PN/2016 3. UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT, 1961 AS DISCUSSED IN PARA. 4.1 RS.1,00,000/- 4. DISALLOWANCE ON ACCOUNT OF VARIOUS EXPENSES AS DISCUSSED IN PARA 5 RS.15,000/- RS.8,36,188/- ---------------- TOTAL INCOME RS.18,52,508/- ROUNDED OFF U/S.288A RS.18,52,210/- AGRICULTURAL INCOME FOR RATE PURPOSE RS. 55,466/- 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) BY RAISING THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND A CCORDING TO PROVISIONS OF LAW, THE LD. DCIT IS NOT JUSTIFIED IN RE- OPENING THE CASE U/S.147. THE SAME REQUIRED TO BE CANCELLED. ON MERITS : 2. THE LD. DCIT ERRED IN TREATING LOSS ON ACCOUNT OF GUR TRANSACTION AS SPECULATIVE LOSS WITHOUT APPRECIATING FA CTS AND CIRCUMSTANCES OF THE CASE. THE LOSS BEING GENUINELY INC URRED AND ARISING OUT OF NON-SPECULATIVE TRANSACTIONS MAY KINDLY BE ALLOWED AS BUSINESS LOSS. 3. THE LD. DCIT IS NOT JUSTIFIED IN ESTIMATING ACCRUED INTEREST AT RS.3,60,000/- ON STICKY LOAN/ADVANCE OF P.D. MAHAJAN. THE PRINCIPAL AMOUNT IS BEING STICKY AND NOT RECOVERABLE AS SUCH CHAR GING OF INTEREST IS NOT JUSTIFIABLE AND AN ADDITION OF INTEREST MAY KINDLY BE DELETED. 4. WITHOUT PREJUDICE TO GR.NO.3 ASSUMING WITHOUT ADMI TTING ANY INTEREST HAD TO BE CHARGED AS ACCRUED, IT MAY BE HELD THAT IT WAS CHARGEABLE ONLY IN RESPECT OF NET AMOUNT AFTER DEDUC TING RS.14,50,000/- ON WHICH ASSESSEE HAS NOT CLAIMED ANY INTE REST. 5. THE AO IS NOT JUSTIFIED IN MAKING DISALLOWANCE OF R S.15,000/- ON ACCOUNT OF VARIOUS EXPENSES. ADDITION MAY KINDLY BE DELETED TOTALLY OR MAY KINDLY BE REDUCED REASONABLY AS DEEMED IT. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER O R SUBSTITUTE ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING OF T HE APPEAL. 5. IN APPEAL THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESS EE BY OBSERVING AS UNDER : 4. I HAVE CAREFULLY PERUSED THE SUBMISSION OF THE APP ELLANT IN LIGHT OF THE FACTS OF THE CASE. DURING THE YEAR UNDE R CONSIDERATION, THE APPELLANT HAD PURCHASED GUR FROM M/S. DIPAKKUMAR & CO MPANY AND 4 ITA NO.1377/PN/2016 HAD CLAIMED LOSS OF RS.36,11,880/- AS SPECULATIVE LOSS AND AO BASED ON THE OBSERVATION OF LD.CIT(A) IN THE CASE OF THE AP PELLANT FOR A.Y. 2001-02 HAD DECIDED THE MATTER AGAINST THE APPELLANT . AGGRIEVED AGAINST THE ORDER OF THE LD.CIT(A), THE APPELLANT FI LED AN APPEAL BEFORE HONBLE ITAT, PUNE AND VIDE ORDER NO.ITA NO.1112/PN /2005 DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. THE OPERATIVE PART OF THE DECISION BY THE HONBLE ITAT, PUNE IS EXTRACTED BELOW FOR REF ERENCE : PARA 3. WE HAVE HEARD THE SUSBMISSIONS OF BOTH THE SIDE S AND ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. BEFORE WE PROCEEDS TO EXAMINE THE LEGAL POSITION OF THE ISSUE, WE MAY LIKE TO REPRODUCE CERTAIN EVIDENCES WHICH WERE BEFORE THE AO AS FOLLOWS : (I) LETTER FROM DIPAKKUMAR & CO. DATED 24-02-2001 INF ORMING ASSESSEE THAT THE GUR HAS BEEN PURCHASED. (II) LETTER FROM DIPAKKUMAR & CO. DATED 27-01-2001 ASKING M/S. SUBHASH SHAH TO SEND THE MONEY AT THE EARLIEST. (III) LETTER FROM DIPAKKUMAR & CO. DATED 23-02-2001 MENTI ONING THAT MORE THAN 30% OF THE GUR HAS BEEN DETERIORATE D AND THE DAMAGE IS INCREASING. (IV) LETTER FROM M/S. VISHWAS TRADING CO. DATED 05-03-2001 AND DATED 10-03-2001. BOTH THESE LETTERS MENTIONS THE DETERIORATING CONDITIO N OF GUR AND THEY HAVE MADE OFFER TO PURCHASE THE GUR @RS.8,50 /- PER QUINTAL. (V) ASSESSEE HAS ALSO PRODUCED COPIES OF PURCHASE BILS OF GUR FR OM M/S. DIPAKKUMAR & CO. DATED 16-1-2001 49,496 KG DATED 20-1-2001 50,241 KG DATED 22-1-2001 41.988 KG (VI) SALE BILLS IN RESPECT OF SALE OF GUR (BY DIPAKKUMAR & CO. ON BEHALF OF ASSESSEE) DATED 16-3-2001 49,496 KG DATED 16-3-2001 50,241 KG DATED 16-3-2001 41.988 KG THOSE EVIDENCES HAVE ALSO BEEN REITERATED BEFORE LD.CI T(A) AND FOR THE SAKE OF CONVENIENCE, REPRODUCED BELOW : (A) A LETTER FROM DIPAKKUMAR & CO. DATED 24-01-2001 INF ORMING THE ASSESSEE THAT THE GUR HAD BEEN PURCHASED. (B) A LETTER FROM DIPAKKUMAR & CO. DATED 27-01-2001 ASK ING MR. SUBHASH SHAH TO SEND THE MONEY AT THE EARLIEST. (C) A LETTER FROM DIPAKKUMAR & CO. DATED 23-02-2001 MEN TIONING THAT MORE THAN 30% OF THE GUR HAD BEEN DETERIORATED AND THE DAMAGE WAS INCREASING. (D) LETTERS FROM M/S. VISHWAS TRADING COMPANY DATED 05-03-2 001 AND DATED 10-03-2001 IN BOTH THE LETTERS THERE WAS MENTION OF DETERIORATION OF THE GUR AND THEY HAD MADE OFFER TO PURCHASE THAT GUR AT RS.850/- PER QUINTAL. IN THIS MANNER, THE APPELLANT HAS TRIED TO ESTABLISH TH AT THE AFORESAID COMMODITY WAS TRANSACTED THROUGH M/S. DIPAKKUMAR & CO . THE LETTERS PRODUCED HAVE ESTABLISHED THAT THE DELIVERY OF GOODS WAS 5 ITA NO.1377/PN/2016 TAKEN AT KOLHAPUR AND KEPT IN THE GODOWNS OF M/S. DIP AKKUMAR & CO. IT WAS STATED THAT THE APPELLANT HAD NO STORAGE FACILI TY AT KOLHAPUR. IT HAS ALSO BEEN RECORDED BY THE AO THAT ONE OF THE PART NER NAMELY MR. KANTILAL KEEMJI BHEDA OF THE FIRM M/S. DIPAKKUMAR & CO. WAS ALSO PRODUCED. THERE IS AN EVIDENCE THAT M/S. DIPAKKUMAR & CO. HAS PAID GODOWN RENT OF RS.3,000/- TO ANOTHER PARTY. THE REA SON FOR LOSS HAS ALSO BEEN EXPLAINED THAT THERE WAS, A GENERAL FALL OF JIGGERY RATES IN THE MARKET. THE ARGUMENT FROM THE SIDE OF THE APPELLANT WAS THAT THE AO HAS MERELY PROCEEDED ON CERTAIN DATES WHICH WERE WITH OUT ANY BASIS, HOWEVER, ON THE OTHER HAND, THE APPELLANT HAD SEVERA L WITNESSES IN SUPPORT OF GENUINENESS OF TRANSACTION AND ACTUAL MOVEME NT OF THE COMMODITY IN QUESTION. IN THE LIGHT OF THE ABOVE FA CTUAL POSITION, WE HAVE EXAMINED THE RELEVANT PROVISION OF SECTION 43(5) OF I.T. ACT WHICH PRESCRIBES THAT A TRANSACTION IN WHICH CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY IS PERIODICALLY OR ULTIMATEL Y SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY, OR TRANSFER OF THE COMMODITY IS SAID TO BE A SPECULATIVE TRANSACTION. SO THE DISPUTE IS ONLY IN RESPECT OF THE DELIVERY OF THE GOODS. HOWEVER, THE LAW PRESC RIBES THAT THE DELIVERY COULD BE ACTUAL OR CONSTRUCTIVE. WITHOUT G OING IN DETAIL OF THOSE LEGAL PROPOSITIONS, AND SINCE THE ISSUE IS NOT COMPL EX CONSIDERING THE FACTS OF THE CASE, WE MAY LIKE TO CONF INE OURSELVES TO THE FACT OF THIS CASE THAT THE GOODS UNDER TRANSACTION CAN BE IN POSSESSION OF A THIRD PERSON REPRESENTING THE PURCHASER, M AY BE IN A CAPACITY OF AN BAILEE AND AFTER THE COMPLETION OF T HIS TRANSACTION SUCH THIRD PERSON ME ATTORN TO THE BUYER. THE TERM ACTU AL DELIVERY IS NOT RESTRICTED TO THE DELIVERY TO THE ASSESSEE HIMSELF. IT C AN BE TO THE AGENT OF THE ASSESSEE. THE REVENUE AUTHORITIES ARE EXPE CTED TO TAKE INTO ACCOUNT THE TOTALITY OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AS EMERGES FROM THE EVIDENCES PLACED ON RECORD, SO THAT T HERE SHOULD NOT BE ANY SCOPE OF HYPOTHECATION OR UNFOUNDED DOUBTS. T HE COPIES OF ACCOUNTS ABOUT SETTLEMENT OF THE TRANSACTION, CONFIRMA TION LETTERS AND SEVERAL OTHER SURROUNDING EVIDENCES GOES IN FAVOUR OF T HE CLAIM OF THE ASSESSEE. WITH THE RESULT, WE HEREBY REVERSE THE FINDING S OF THE AUTHORITIES BELOW AND DIRECT TO GIVE THE NECESSARY REL IEF TO THE ASSESSEE. SINCE, THE ISSUE UNDER CONSIDERATION IS IDENTICAL WITH THE A.Y. 2001-02 AND HONBLE ITAT, PUNE HAS DECIDED THE MATTER IN FA VOUR OF THE APPELLANT. RESPECTFULLY FOLLOWING THE DECISION OF HO NBLE ITAT, PUNE THE MATTER IS DECIDED IN FAVOUR OF THE APPELLANT AND THEREFORE THE AO IS DIRECTED TO DELETE THE AMOUNT OF RS.36,11,880/- TO WARDS SPECULATIVE LOSS. THIS GROUND OF APPEAL STANDS ADJUDICATED. 5. SINCE THE APPELLANT HAS NOT PRESSED OTHER GROUNDS OF APPEAL FOR THE STATISTICAL PURPOSE THEY SHOULD BE TAKEN AS DISMISSED G ROUNDS OF APPEAL. 6. AGGRIEVED WITH SUCH ORDER OF CIT(A), THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PRESSED ALL THE GROUNDS AND THE CIT(A) HAS ONLY ADJUDICATED ONE ISSUE AND HAS NOT ADJUDICATED THE OTHE R GROUNDS 6 ITA NO.1377/PN/2016 STATING THAT THE ASSESSEE HAS NOT PRESSED FOR THE OTH ER GROUNDS. HOWEVER, ALL THOSE ISSUES ARE DECIDED BY THE TRIBUNAL IN T HE PRECEDING YEARS WHICH ARE IN FAVOUR OF THE ASSESSEE AND THE ASSESSEE HAD VERY MUCH PRESSED THOSE GROUNDS. THE L D. COUNSEL FOR THE ASSESSEE ALSO FILED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A) VIDE LETTER DATED 07-03-2016. HE SUBMITTED THAT ALL THOSE ISSUES WERE RAISED BEFORE THE CIT(A). HOWEVER, HE H AS IGNORED THOSE SUBMISSIONS AND HAS SIMPLY STATED THAT T HE ASSESSEE HAS NOT PRESSED FOR THOSE GROUNDS. HE SUBMITTED THAT ALTHOUGH PETITION U/S.154 HAS BEEN FILED BEFORE THE CIT(A), HOWEVER, T HE SAME IS STILL PENDING. HE ACCORDINGLY SUBMITTED THAT SUITAB LE DIRECTIONS MAY BE GIVEN TO THE CIT(A) TO DECIDE THOSE ISSUES. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT H E HAS NO OBJECTION IF THE MATTER IS SET ASIDE TO THE FILE OF THE CIT(A). 9. AFTER HEARING BOTH THE SIDES, I FIND THE ASSESSEE HAS M ADE ELABORATE SUBMISSIONS BEFORE THE CIT(A) ON VARIOUS ISSUES RAISED IN THE GROUNDS. HOWEVER, THE LD.CIT(A) HAS ADJUDICATED ONLY ONE ISSUE AND HAS NOT ADJUDICATED THE OTHER GROUNDS BY H OLDING THAT THE ASSESSEE HAS NOT PRESSED THOSE GROUNDS. UNDER T HESE CIRCUMSTANCES, I DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO ADJUDICATE THE VARIOUS OTH ER GROUNDS WHICH HE HAS NOT DECIDED BY STATING THAT ASSESSEE DID N OT PRESS THOSE GROUNDS. THE LD.CIT(A) SHALL DECIDE THE OTHER ISSUES IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGLY. GROUNDS RAISED BY TH E ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7 ITA NO.1377/PN/2016 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29-07-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED :29 TH JULY, 2016. '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // // TRUE COPY // // $ % //UE &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - 4 , PUNE 4. THE CIT-4, PUNE 5. $ %%* , * , SMC BENCH / DR, ITAT, SMC BENCH PUNE; 6. 2 / GUARD FILE.