MADHUSUDAN K. JANI, MUMBAI V. ITO 14(1)(3), MUMBAI

ITA 1392/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83740 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 28-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Keywords: Business income; Depreciation; Opportunity of being heard; Speculation loss
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1392/MUM/2011 ASSESSMENT YEAR: 2007-08 MADHUSUDAN K. JANI PRANAV, 28, ASHOK NAGAR SOCIETY, 9 TH N.S. ROAD, JVPD SCHEME, MUMBAI- 400 049 PAN:AACDJ 4299 A VS. ITO 14(1)(3) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : AARTI VISSANJI REVENUE BY : SMT. PARMINDER DATE OF HEARING : 28.08.2014 DATE OF PRONOUNCEMENT : 17 .0 9 .2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -25, MUMBAI DATED 02.12.2010 FOR THE ASSE SSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- THE EX-PARTE ASSESSMENT ORDER PASSED BY THE ASSESSI NG OFFICER SHOULD BE SET ASIDE AS NO REASONABLE OPPORTUNITY OF BEING HEA RD WAS GIVEN TO THE ASSESSEE SINCE MOST OF THE ALLEGED NOTICES SENT TO THE ASSESSEE WERE NOT AT ALL RECEIVED BY THE ASSESSEE AND THE ASSESSEE WA S PREVENTED BY SUFFICIENT CAUSE IN NOT COMPLYING WITH LAST NOTICE CALLING THE ASSESSEE ON 24.12.2009 WAS RECEIVED BY THE APPELLANT ON 21.12.2 009 WHEN APPELLANT SON LOOKING AFTER HIS INCOME TAX MATTERS HAD GONE O FF BOMBAY TO HIS BUSINESS WORK. AFFIDAVIT FILED WITH CIT(A) MARKED S TATEMENT A. THE LEARNED CIT APPEAL HAS NOT TAKEN INTO ACCOUNT T HE SPLIT UP OF THE BALANCE BROUGHT FORWARD LOSSES INTO (I) LOSS OUT OF DERIVATIVE TRANSACTIONS. (II) LOSS OUT OF SPECULATION TRANSACTIONS AS PER STATEME NT FURNISHED TO THE CIT(A) MARKED AS B AND, THEREFORE HAS ERRED I N DISALLOWING THE SET OFF OF BROUGHT FORWARD DERIVATIVE LOSS AGAINST THE PROFIT OF DERIVATIVE BUSINESS AND THE SAME SHOULD BE ALLOWED TO BE SET O FF AGAINST PROFIT FROM DERIVATIVE TRANSACTIONS. ITA NO. 1392/MUM/2011 MADHUSUDAN K. JANI ASSESSMENT YEAR: 2007-08 2 THE LEARNED CIT APPEAL HAS ERRED IN CONFIRMING DISA LLOWANCE OF DEPRECIATION AND INSURANCE ON MOTOR CAR FROM CAR HI RE CHARGES AS THE SAME ARE ALLOWABLE AS DEDUCTION IRRESPECTIVE WHETHE R OR NOT SUCH INCOME IS TREATED AS BUSINESS INCOME OR INCOME FROM OTH ER SOURCES AND IT IS PRAYED THAT THE ASSESSING OFFICER BE DIRECTED TO AL LOW THE SAID DEDUCTION IN COMPUTING INCOME FROM CAR HIRE CHARGES. 3. THE RELEVANT FACTS ARE THAT THE AO COMPLETED THE ASSESSMENT IN THE CASE OF THE ASSESSEE U/S 144 OF THE INCOME TAX ACT IN VIEW OF THE FACT THAT DESPITE SEVERAL OPPORTUNITIES WERE GIVEN TO THE ASSESSEE FOR FURNIS HING THE DETAILS CALLED FOR, THE ASSESSEE WAS NOT WILLING TO CO-OPERATE THE ASSESSME NT PROCEEDING AND DO NOT BOTHER TO ATTEND THE OFFICE OF THE AO ON VARIOUS DATES GIV EN TO EXPLAIN THE CASE OF THE ASSESSEE. THEREFORE, IN THE ASSESSMENT COMPLETED U/ S 144, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR SET OFF OF BROUGHT FORWAR D DERIVATIVE LOSS AGAINST CURRENT YEARS TRADING INCOME OF RS.5,47,786/-. ALSO, THE A O DISALLOWED THE CLAIM OF DEDUCTION OF RS.1,48,824/- ON ACCOUNT OF DEPRECIATI ON AND INSURANCE PAID ON MOTOR CAR FOR THE REASON THAT NO DOCUMENTARY EVIDENCES WE RE AVAILABLE ON THE RECORD TOWARDS THE SAID CLAIM. ON APPEAL, THE LD.CIT(A) UP HELD THE VALIDITY OF THE ASSESSMENT ORDER PASSED U/S 144 OF THE ACT ON REASO N THAT THE ASSESSEE WAS GIVEN FIVE OPPORTUNITIES IN THE FORM OF NOTICES/SHOW CAUS E NOTICES WHICH WERE NOT RESPONDED BY THE ASSESSEE AND THE AO WAS COMPELLED TO DECIDE THE ASSESSMENT ON MERIT U/S 144 OF THE ACT. ON MERITS, ON THE ISSUE O F OMISSION TO SET OFF BROUGHT FORWARD LOSS IN DERIVATIVE TRANSACTIONS IN SHARES, THE LD.CIT(A) WAS OF THE VIEW THAT THE EARLIER YEARS LOSSES WERE SPECULATIVE LOSS BEC AUSE OF THE RETURN OF INCOME FOR PRECEDE YEAR AS WELL AS CURRENT YEAR MENTIONED THAT THESE LOSSES WERE SPECULATIVE LOSSES AND THEREBY CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THIS COUNT. ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION AND INSUR ANCE ON MOTOR CAR, THE LD.CIT(A) HAS HELD THAT SECTION 57 DO NOT PROVIDE FOR DEDUCTI ON ON ACCOUNT OF DEPRECIATION AND INSURANCE ON VEHICLE AND THE ASSESSEES CLAIM CANNO T BE ACCEPTED AS SUCH. AGGRIEVED BY THE IMPUGNED DECISION THE ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, FIRSTLY, ON THE ISSUE OF OMISSION TO SET OFF BROUGHT FORWARD LO SS IN THE DERIVATIVE TRANSACTIONS IN SHARES, IT IS OBSERVED THAT THE LD.CIT(A) HAS NOT T AKEN INTO ACCOUNT OF THE STATEMENT FURNISHED BY THE ASSESSEE ON THE SPLIT UP OF THE BA LANCE BROUGHT FORWARD LOSSES INTO ITA NO. 1392/MUM/2011 MADHUSUDAN K. JANI ASSESSMENT YEAR: 2007-08 3 LOSS OUT OF DERIVATIVE TRANSACTION AND LOSS OF SPEC ULATIVE TRANSACTION AND IN THE RESULT THE LD.CIT(A) HAS ERRED IN DISALLOWING THE SET OFF OF BROUGHT FORWARD DERIVATIVE LOSS AGAINST THE PROFIT OF DERIVATIVE BUSINESS WHEREAS T HE SAME IS ALLOWABLE IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF GAJENDRA KUMAR T. AGARWAL VS. ITO REPORTED IN 142 TTJ 612. HAVING NOTED THAT THE NATURE OF THE TRANSACTION HA S NOT BEEN VERIFIED BY THE AO WHILE PASSING THE ASSESSMENT ORD ER U/S 144 AND ALSO THE LD.CIT(A) HAS NOT CONSIDERED THE STATEMENT OF SPLIT UP OF THE BALANCE BROUGHT FORWARD LOSSES INTO LOSS OUT OF DERIVATIVE TRANSACT ION AND LOSS OUT OF SPECULATIVE TRANSACTION, WE ARE OF THE CONSIDERED VIEW THAT IT IS JUST AND PROPER TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE AO TO VERITY THE NATU RE OF THE TRANSACTION AND ALLOW THE SET OFF BROUGHT FORWARD DERIVATIVE LOSS AGAINST THE PROFIT OF DERIVATIVE BUSINESS IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT AND ORDER ACCORDINGLY. 4.1 SECONDLY, ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION AND I NSURANCE ON MOTOR CAR, IT IS RELEVANT TO STATE THAT THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE REASON THAT NO DOCUMENTARY EVIDENCES HAVE B EEN AVAILABLE ON THE RECORD TOWARDS THE SAID CLAIM. HOWEVER, THE LD.CIT(A) HAS HELD THAT SECTION 57 DO NOT PROVIDE FOR DEDUCTION ON ACCOUNT OF DEPRECIATION AN D INSURANCE ON VEHICLE AND THE ASSESSEES CLAIM CANNOT BE ACCEPTED AS SUCH. IN THI S CONNECTION, IT IS PERTINENT TO MENTION THAT SECTION 56(2)(II) PROVIDES THAT INCOME FROM MACHINERY, PLANT OR FURNITURE BELONGING TO THE ASSESSEE AND LET ON HIRE , IF THE INCOME IS NOT CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCE . BY VIRTUE OF SECTION 57(II), THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON T HE MACHINERY, PLANT OR FURNITURE WHICH ARE LET ON HIRE. THE ITEMS DESCRIBED AS ELIGI BLE IN THE SAID PROVISION INCLUDES MOTOR CAR ALSO WHICH IS LET ON HIRE. THEREFORE, THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE MOTOR CAR IRRESPECTIVE OF THE F ACT WHETHER THE INCOME IS ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION OR INCOME FROM OTHER SOURCES. AS REGARDS DEDUCTION ON ACCOUN T OF INSURANCE EXPENSES CLAIMED BY THE ASSESSEE, THE CLAIM OF THE ASSESSEE IN RESPE CT OF THE SAID EXPENSES IS ALLOWABLE BY VIRTUE OF SECTION 57(III) OF THE ACT E VEN IF THE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, WE OVERTURN THE DECISION OF THE ITA NO. 1392/MUM/2011 MADHUSUDAN K. JANI ASSESSMENT YEAR: 2007-08 4 LD.CIT(A) ON THESE ISSUES AND DIRECT THE AO TO ALLO W THE CLAIM OF THE ASSESSEE ON VERIFICATION OF THE DETAILS AFTER PROVIDING REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESEE AND ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (N.K. BILLAIYA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.09.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.