ALL BANK FINANCE LTD., V. ACIT, Cir-6, Kol,

ITA 1436/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48215 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L S NEGI
• Assessee Lawyers: PIYUSH DEY
• Keywords: Capital asset; Business income; Period of limitation; Validity of assessment; Capital receipt; Reason to believe; Reassessment proceedings
• Section: 147; 143(3); 2(14); 260A

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [ . . . . . . . . , ,, , , ,, , , ] [BEFORE HONBLE SHRI B. R. MITT AL, JM & HONBLE SHRI AKBER BASHA, AM] !' !' !' !' / I.T.A NO. 1436/KOL/2009 #$ %&' #$ %&' #$ %&' #$ %&'/ // / ASSESSMENT YEAR : 2004-05 ALL BANK FINANCE LIMITED -VS. - ASSTT. COMMISSIONER OF INCOME TAX KOLKATA. [PAN : AACCA 4014 D ] CIRCLE-6, KOLKATA (*+ /APPELLANT ) (-.*+/ RESPONDENT ) *+ / FOR THE APPELLANT : / /SHRI PIYUSH DEY -.*+ / FOR THE RESPONDENT : / / SHRI L. S. NEGI, CIT /O R D E R [ . . . . . . . . , ] PER B. R. MITTAL, JM THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2004-05 AGAINST ORDER OF CIT (A)-VI, KOLKATA DATED 15.06.2009. 2. THE ASSESSEE VIDE ITS LETTER DATED 11.04.2011 HA S TAKEN AN ADDITIONAL GROUND WHICH IS AS UNDER :- THAT ON FACTS AS WELL AS ON LAW, THE ENTIRE PROCEE DING INITIATED BY THE DEPARTMENT UNDER SECTION 147 IS BAD IN LAW IN ABSEN CE OF ANY NEW FACT/MATERIAL AVAILABLE TO THE ASSESSING OFFICER AT THE TIME OF S UCH INITIATION. 3. SUBSEQUENTLY, ASSESSEE VIDE LETTER DATED 20.04.2 011, MODIFIED THE GROUNDS OF APPEAL AS THE EARLIER GROUNDS OF APPEAL FILED WITH MEMORANDUM OF APPEAL WERE NOT SPECIFIC. THE MODIFIED GROUNDS OF APPEAL ARE AS UNDER :- (1) THAT, ON FACTS AS WELL AS ON LAW, THE ORDER OF THE LD. CIT(A ) IS BIASED AND PERVERSE AND THERE, IS BAD IN LAW. (2) THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE IMPUGNED DIFFERENCE AMOUNTING TO RS. 8,60,59,291/- BETWEEN THE AMOUNT OF PROFIT ON SALE OF SHARES (HEL D AS CAPITAL ITA NO. 1436/KOL/2009 2 ASSETS) REFLECTED IN SCHEDULE-L OF THE FINANCIAL ST ATEMENTS AND THE BOOK PROFIT ON SUCH SALE REFLECTED IN THE RETURN OF INCOME. (3) THAT, ON FACTS AS WELL AS ON LAW AND WITHOUT PREJUDICE TO TH E GROUND NO.2 ABOVE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THAT THE IMPUGNED DIFFERENCE AS STATED IN GROUND NO.2 ABOVE IS ASSESS ABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION INSTEAD OF CAPITAL GAINS. (4) THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) HAS ERRED I N CONFIRMING DISALLOWANCE OF PROVISION OF DIMINUTION OF RS.16,05 ,550/- (CORRECT AMOUNT RS.16,05,950/-) IN VALUE OF SHARES DEVOLVED ON THE APPELLANT UNDER THE UNDERWRITING CONTRACTS WITH THE ISSUER CO MPANIES CONSIDERING SUCH SHARES AS CAPITAL ASSETS INSTEAD OF TRADING AS SETS IN COMPLETE DISREGARD OF THE DECISION OF HONBLE INCOME TAX APP ELLATE TRIBUNAL, D BENCH, KOLKATA (ITA NO.979/KOL/2005 DATE OF J UDGMENT 24.11.2006) (FOLLOWING THE DECISION OF THE APEX COU RT IN PATNAIK & CO. LTD. VS. CIT 161 ITR 365) IN THE APPELLANTS OWN CA SE FOR ASSESSMENT YEAR 2001-02 ON IDENTICAL FACT. (5) THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) HAS ERRED I N CONFIRMING THAT PROFIT ON RENUNCIATION OF RIGHT TO SUBSCRIBE R IGHT SHARES AMOUNTING TO RS.17,41,145/- IS TAXABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION INSTEAD OF CAPITAL GAINS. (6) THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) HAS ERRED I N CONFIRMING ADDITION OF RS.29,72,118/-BEING DIVIDEND FOR EARLIE R YEAR TO THE BUSINESS INCOME AS UNEXPLAINED INCOME OF THE APPELLANT, THOU GH SUCH DIVIDEND WAS DULY TAXED IN THE EARLIER YEAR. 4. FIRSTLY, WE TAKE THE ADDITIONAL GROUND TAKEN BY ASSESSEE AS IT GOES TO THE VALIDITY OF ASSESSMENT ORDER PASSED BY ASSESSING OFFICER. 5. THE RELEVANT FACTS ARE THAT ASSESSEE ORIGINALLY FILED RETURN. THE SAID RETURN WAS PROCESSED U/S. 143(1) ON 25.02.2006. SUBSEQUENTLY, ASSESSING OFFIC ER AFTER RECORDING THE REASONS REOPENED THE ASSESSMENT AND ISSUED NOTICE U/S. 148 OF THE ACT DA TED 02.03.2007. THE REASONS RECORDED BY ASSESSING OFFICER HAVE BEEN STATED IN ASSESSMENT OR DER ITSELF AND A COPY OF THE SAME IS ALSO PLACED AT PAGE 32 OF THE PAPER BOOK. THE ASSESSEE FILED IT S REPLY TO THE NOTICE ISSUED U/S. 148 OF THE ACT, A COPY OF WHICH IS PLACED AT PAGE 29 OF THE PAPER BOO K. ASSESSING OFFICER COMPLETED ASSESSMENT U/S. 143(3)/147 OF THE ACT VIDE ORDER DATED 31.08.2007. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE 1ST APPELLATE AUTHORITY. 5.1 IT IS RELEVANT TO STATE THAT ASSESSEE DID NOT D ISPUTE THE VALIDITY OF INITIATING REASSESSMENT PROCEEDINGS BEFORE LD. CIT(A) AND THE SAID GROUND H AS BEEN TAKEN BY ASSESSEE BEFORE THE TRIBUNAL BY AN ADDITIONAL GROUND. ITA NO. 1436/KOL/2009 3 6. AT THE TIME OF HEARING, LD. AUTHORISED REPRESENT ATIVE FOR THE ASSESSEE SUBMITTED THAT NO ADDITIONAL FACTS HAVE COME TO THE NOTICE OF ASSESSI NG OFFICER. ASSESSEE FILED AUDITED ACCOUNTS ALONGWITH RETURN AND ASSESSING OFFICER HAS INITIATE D REASSESSMENT PROCEEDINGS ONLY ON THE BASIS OF RECORD ALREADY AVAILABLE BEFORE HIM WHICH WAS ACCEP TED BY ASSESSING OFFICER WHEN THE RETURN OF THE ASSESSEE WAS PROCESSED. THEREFORE, ASSESSING OFFICE R APPLIED HIS MIND WHEN RETURN WAS PROCESSED BY HIM. HENCE, NOTICE ISSUED U/S. 148 OF THE ACT IS NOT VALID. LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE DELHI HI GH COURT IN THE CASE OF SHIPRA SRIVASTAVA VS. ACIT 2009-TIOL-513-HC-DEL-IT. 7. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ACTION OF ASSESSING OFFICER. HE SUBMITTED THAT THE RETURN FILED BY ASSE SSEE WAS ACCEPTED U/S. 143(1) OF THE ACT AND ASSESSING OFFICER DID NOT APPLY HIS MIND WHEN THE R ETURN WAS PROCESSED. HE SUBMITTED THAT ASSESSING OFFICER RECORDED THE REASONS AFTER BEING SATISFIED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE FURTHER SUBMITTED THAT ACTIO N HAS BEEN TAKEN WITHIN THE PERIOD OF LIMITATION. HE FURTHER SUBMITTED THAT WHEN THE NOTICE IS ISSUED U/S. 148 OF THE ACT, AFTER BEING SATISFIED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, ON LY THE SATISFACTION OF THE ASSESSING OFFICER IS SUFFICIENT AND IT IS NOT NECESSARY, HE MUST ALSO ES TABLISH THAT INCOME HAS ESCAPED ASSESSMENT AT THE TIME OF ISSUING NOTICE. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND ALSO THE REASONS RECORDED BY ASSESSING OFFICER AND THE REPLY FILED BY ASSESSEE (SUPRA). WE OBSERVE THAT THE MAIN CONTENTION OF ASSESSEE IS THAT IF RET URN WAS FILED AND ASSESSING OFFICER FAILED TO TAKE ACTION U/S. 143(2), AND EVEN IF ASSESSING OFFICER I S SATISFIED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, ASSESSING OFFICER CAN NOT TAKE ACTION U/S. 147 OF THE ACT. WE ARE NOT INCLINED TO ACCEPT THE SAID CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE. WE OBSERVE THAT RELIANCE PLACED BY LD. AUTHORISED REPRESENTATIVE FO R THE ASSESSEE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SHIPRA SRIVASTAVA (SUPRA) . THE FACTS OF THAT CASE ARE DIFFERENT THAN THE FAC TS OF THE CASE BEFORE US. IN THE SAID CASE, HONBLE DE LHI HIGH COURT FOUND THAT THE BASIS ON WHICH ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDING S TO ARRIVE AT A CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WAS WITHOU T BASIS. IN THE RELEVANT ASSESSMENT YEAR ASSESSEE WAS POSTED AT RAIPUR AND THEREFORE, THERE WAS NO QUESTION THAT ASSESSEE OCCUPIED RENT FREE ACCOMMODATION FROM ITS EMPLOYER AT NEW DELHI. IT WA S FOUND BY HONBLE DELHI HIGH COURT THAT THE REASONS RECORDED BY ASSESSING OFFICER WAS WITHOUT A NY FOUNDATION AND WAS, IN FACT, WHOLLY ITA NO. 1436/KOL/2009 4 BASELESS. ON THE OTHER HAND, IN THE CASE BEFORE US, WE OBSERVE THAT ASSESSING OFFICER IN THE REASONS RECORDED HAS GIVEN SPECIFIC INSTANCES TO COME TO CO NCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ONLY ON THAT BASIS HE ISSUED NOTICE U/S. 148 OF THE ACT. FURTHER, HONBLE APEX COURT IN THE CASE OF CIT VS. RAJESH JHAVERI ST OCK BROKERS (P) LTD. [2007] 291 ITR 500, HAS ALSO HELD THAT MERELY BECAUSE THE RETURN FILED BY A SSESSEE WAS ACCEPTED U/S. 143(1) AND ASSESSING OFFICER FAILED TO TAKE ACTION U/S. 143(2), THAT WI LL BE NOT TAKE AWAY ASSESSING OFFICERS POWER TO TAKE ACTION U/S. 147 OF THE ACT, IF THERE IS ESCAPE MENT OF INCOME, BUT AT THE SAME TIME, THEIR LORDSHIPS MADE IT CLEAR THAT MANDATE OF SECTION MUS T BE FULFILLED. WE CONSIDER IT PRUDENT TO STATE THE RELEVANT PART OF THE SAID DECISION AS UNDER :- 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1.4.1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTI ALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION . UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSES SMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDE R SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY TH E ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME FROM PROFITS OR GAINS CHARGEABLE TO INCOME- TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (1 ) OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE J URISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UND ER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE AS SESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO. 18. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UNDER SECTIO N 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. CONSIDERING THE FACTS OF THE CASE BEFORE US AND THE DECISION OF HONBLE APEX COURT (SUPRA), WE HOLD THAT THAT ASSESSING OFFICER HAS VALIDLY ISSUED NOTI CE U/S. 148 OF THE ACT. HENCE, THE ADDITIONAL GROUND OF APPEAL TAKEN BY THE ASSESSEE IS REJECTED. 9. NOW, WE TAKE THE MODIFIED GROUNDS OF APPEAL FOR OUR CONSIDERATION. 10. GROUND NO.1 IS GENERAL AND DO NOT REQUIRE ANY S PECIFIC ADJUDICATION. ITA NO. 1436/KOL/2009 5 11. IN RESPECT OF GROUND NOS. 2 & 3 OF MODIFIED GRO UNDS OF APPEAL, THE RELEVANT FACTS ARE THAT ASSESSEE IS A NON-BANKING FINANCE COMPANY. IT IS ST ATED THAT ASSESSEE ENTERED INTO CERTAIN SHARE TRANSACTIONS WITH BROKER V.B. DESAI IN 1992. SINCE THERE WAS A SCAM AND THOSE SHARES BECAME SUBJECT MATTER OF DISPUTE, THE MATTER WENT TO HONB LE SPECIAL COURT AS PER ENACTMENT OF CENTRAL GOVERNMENT AND THE SPECIAL COURT APPOINTED A CUSTOD IAN TO TAKE POSSESSION OF SAID SHARES. IN NOVEMBER, 2002, SPECIAL COURT GAVE ITS VERDICT TO R ESOLVE THE ISSUE AND DIRECTED THE ASSESSEE TO ACCEPT THE SHARES AS REPAYMENT AND TAKE THE SHARES AS SETTLEMENT OF DISPUTE. THE ASSESSEE HAS FILED CALCULATION SHEET SHOWING LONG TERM CAPITAL GAIN OF RS.10,77,17,827/-. ASSESSING OFFICER WHILE COMPLETING ASSESSMENT STATED THAT ASSESSEE HAD TAKE N INTO ACCOUNT PROFIT OF RS.6,24,68,665/-. HOWEVER, AS PER SCHEDULE L ANNEXED TO RETURN, THE AMOUNT OF BOOK PROFIT OUT OF TRADING OF SHARES DISCLOSED IN THE PROFIT FROM EXCEPTIONAL ITEMS, SHO W NET ADJUSTED PROFIT OF ASSESSEE TO BE RS.14,85,27,956/-. ASSESSING OFFICER STATED THAT BA LANCE AMOUNT OF RS.8,60,59,291/- [RS.14,85,27,956/- (-) RS.6,24,68,665/-] REDUCED BY ASSESSEE WITHOUT ANY BASIS AND ACCORDINGLY ADDED TO THE COMPUTATION OF INCOME. ASSESSING OFFIC ER STATED THAT THE SAID AMOUNT IS ADDED AS TRADING RECEIPT. IN THE FIRST APPEAL, LD. CIT(A) VI DE PARA 3.3 OF THE IMPUGNED ORDER CONFIRMED THE ACTION OF ASSESSING OFFICER WHICH IS REPRODUCED HER EUNDER :- I HAVE GONE THROUGH THE ASSESSMENT ORDER OF THE A SSESSING OFFICER. THE ASSESSING OFFICERS ACTION IS COMMENDABLE FOR BRING ING TO TAX, THE AMOUNT OF RS.8,60,59,291/- WHICH WAS OMITTED BY THE APPELLANT . THE FACTS OF THE CASE SHOW THAT THE SHARES WERE THE CAPITAL ASSET OF THE ASSES SEE AND THE COMPUTED LOSS [RS.10,77,17,827/-] ON SALE OF SUCH CAPITAL ASSETS HAD ALSO BEEN ACCEPTED UNDER THE HEAD INCOME FROM CAPITAL GAINS. THE ASSESSEE AS PER SCHEDULE-L ANNEXED TO THE RETURN, HAS SHOWN NET ADJUSTED PROFIT OUT OF TR ADING OF SHARES DISCLOSED IN THE PROFIT FROM EXCEPTIONAL ITEMS AT RS.14,85,27,956/-. THE APPELLANT IN THE COMPUTATION OF INCOME HAD ADJUSTED THE NET PROFIT, SINCE INCOME/LOSS WAS CONSIDERED UNDER THE HEAD CAPITAL GAINS. THE APPELL ANT ADJUSTED ONLY RS.6,24,68,665/- WORTH OF PROFIT IN THE COMPUTATION OF CAPITAL GAIN/LOSS. THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE BEFORE ME T O PROVE THAT THE OMITTED AMOUNT OF RS.8,60,59,291/- IS INCOME FROM CAPITAL G AINS. THE REASONS FOR OMISSION OF THE AMOUNT OF RS.8,60,59,291/- IN THE C OMPUTATION OF CAPITAL GAIN/LOSS COULD NOT BE EXPLAINED. IN VIEW OF THIS, I UPHOLD THE ADDITION OF THE ASSESSING OFFICER TREATING THE AMOUNT OF RS.8,60,59 ,291/- AS TRADING RECEIPT ON EXCEPTIONAL ITEMS. THIS GROUND OF APPEAL IS DISMI SSED. HENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 12. LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE SHARE SO ACQUIRED FROM THE BROKER V. B. DESAI HAVE BEEN RECORDED IN THE BOOKS AS LONG TERM CAPITAL INVESTMENT UNDER SCHEDULE D. HE SUBMITTED THAT DURING THE PERIOD UNDER DISP UTE ALL THE SHARES AND ACCRETION I.E. BONUS SHARES, RIGHT SHARES AND DIVIDEND THEREON, WERE IN THE HAND OF THE CUSTODIAN APPOINTED ON THE ITA NO. 1436/KOL/2009 6 DIRECTION OF THE SPECIAL COURT. HE SUBMITTED THAT A NY SALE PROCEEDS FROM THOSE SHARES SHOULD BE TREATED AS CAPITAL RECEIPT. THE SHARES ACQUIRED FRO M CUSTODIAN SHOULD NOT BE TREATED AS STOCK-IN- TRADE. HE FURTHER SUBMITTED THAT SOME OF THE SHARES RECEIVED FROM CUSTODIAN RELATE TO EARLIER FINANCIAL YEAR. AS THE CUSTODIAN SOLD THAT IN FINAN CIAL YEAR 2001-02 & 2001-03, THE SAME CANNOT BE BROUGHT TO TAX IN ASSESSMENT YEAR UNDER CONSIDERATI ON I.E. 2004-05. HE SUBMITTED THAT ASSESSEE WAS NOT AWARE OF THE DETAILS AND IT CAME TO ASSESSEES NOTICE ONLY WHEN CUSTODIAN GAVE CERTIFICATE OF SALE CONFIRMATION OF THOSE SHARES. LD. AUTHORISED R EPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE CERTIFICATE DATED 09.05.2011 FROM THE CUSTODIAN GIV ING DETAILS OF SOLD OF SOME OF THE SHARES TO SUBSTANTIATE IT. HE SUBMITTED THAT MATTER SHOULD BE RESTORED TO ASSESSING OFFICER TO CONSIDER THE INCOME IN RESPECT OF THOSE SHARES WHICH VESTED IN A SSESSEE ONLY WHEN VERDICT WAS GIVEN BY THE SPECIAL COURT VIDE ORDER DATED 01.11.2002. 13. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE ASSESSING OFFICER FOR HIS FRESH CONSIDERATIO N AS TO IN WHICH ASSESSMENT YEAR, THE INCOME IS TO BE TAXED. 14. IN VIEW OF ABOVE SUBMISSION OF LD. REPRESENTATI VES OF THE PARTIES AND THE FACTS OF THE CASE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN RESPECT OF THE ISSUES INVOLVED IN GROUND NO.2 & 3 AND RESTORE IT TO THE FILE OF THE ASSESSING OFFICER FOR HIS CONSIDERATION ON THE BASIS OF EVIDENCE THA T MAY BE FILED BY ASSESSEE AND IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF HEARING. HENCE, MODIFIED GROUND NOS. 2 & 3 OF THE APPEAL ARE ALLOWE D FOR STATISTICAL PURPOSES. 15. IN RESPECT OF GROUND NO.4 OF MODIFIED GROUND OF APPEAL, THE RELEVANT FACTS ARE THAT ASSESSEE CONSIDERED A SUM OF RS.16,05,950/- AS PROVISION OF DIMINUTION OF VALUE OF CURRENT ASSET. ASSESSING OFFICER STATED THAT ASSESSEE DID NOT DISCLOSE THE S AID SHARES AS CURRENT ASSETS BUT DISCLOSED IN THE BALANCE SHEET AS INVESTMENT. ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF ASSESSEE THAT THE RELEVANT SHARES WERE ACQUIRED BY ASSESSEE IN EARLIE R YEARS ON DEVOLUTION PURSUANT TO UNDER WRITTEN TO PRIMARY ISSUE OF VARIOUS SHARES DUE TO UNDER SUBSCR IPTION. ASSESSING OFFICER DID NOT CONSIDER THAT THOSE SHARES WERE RECEIVED AS A RESULT OF TRADING A CTIVITY OF ASSESSEE. ASSESSING OFFICER ALSO DID NOT ACCEPT THE CONTENTION OF ASSESSEE THAT SAID ISSUE I S COVERED BY THE ORDER OF I.T.A.T. IN RESPECT OF ASSESSMENT YEAR 2001-02 ON THE GROUND THAT DEPARTME NT HAS FILED AN APPEAL U/S. 260A OF THE ACT. ASSESSING OFFICER ALSO STATED THAT THE SAID SHARES WERE NOT TRADED BY ASSESSEE AT ALL FOR A LONG TIME AND WERE HELD FOR LONG TERM CAPITAL GAIN FOR EARNIN G DIVIDEND. BEING AGGRIEVED, ASSESSEE FILED ITA NO. 1436/KOL/2009 7 APPEAL BEFORE LD. CIT(A). LD. CIT(A) HAS CONFIRMED THE ACTION OF ASSESSING OFFICER. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL 16. LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF UNDER-WRITING FOR ISSUE OF SHARES. IF F ULL QUOTA OF SHARES AGREED TO BE UNDER-WRITTEN, WAS NOT FULLY SUBSCRIBED BY PUBLIC, ASSESSEE HAD TO TAK E UP THOSE UNDERSUBSCRIBED PORTION OF SHARES ON ITS OWN ACCOUNT. ASSESSEE STATED THAT THOSE SHARES WERE NOT SHOWN UNDER THE HEAD CURRENT INVESTMENT OF SCHEDULE D. IT WAS CONTENDED THAT T HE SAID SHARES MUST BE TREATED AS TRADING ASSET AS THOSE WERE ACQUIRED IN REGULAR COURSE OF BUSINESS. SINCE MARKET VALUE OF THOSE SHARES WERE FAR BELOW BOOK VALUE, ASSESSEE-COMPANY HAD TO MAKE PROV ISION FOR DIMINUTION IN VALUE OF INVESTMENT TO THE EXTENT OF RS.16,05.950/-. THE ASSESSEE REFER RED ANNEXURE-4 OF THE PAPER BOOK AND SUBMITTED THAT THE DETAILS OF PROVISIONS HAVE BEEN STATED THE REIN. HE FURTHER SUBMITTED THAT SIMILAR ISSUE ON SIMILAR FACTS WAS CONSIDERED BY I.T.A.T., D BENCH , KOLKATA IN ASSESSEES OWN CASE IN ITA NO.979/KOL/2005 VIDE ORDER DATED 24.11.2006 FOR ASS ESSMENT YEAR 2001-02, AND AS SUCH, THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE. HE REFERRED TO PAGES 101 TO 107 OF THE PAPER BOOK, WHICH IS COPY OF THE ORDER OF TRIBUNAL DATED 24.11.2006. 17. LD. DEPARTMENTAL REPRESENTATIVE IN HIS SUBMISSI ON RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 18. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. WE OBSERVE THA T ONE OF THE BUSINESS OF ASSESSEE IS UNDER-WRITING OF SHARE ISSUED BY COMPANIES. IT IS A FACT THAT WH EN SUCH SHARES ARE NOT FULLY SUBSCRIBED BY THE PUBLIC, THE UNSUBSCRIBED PORTION HAS TO BE ACQUIRED BY THE UNDER-WRITERS. ACCORDINGLY, ASSESSEE HAD ACQUIRED THE SAID SHARES IN ITS ORDINARY COURSE OF BUSINESS. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THERE IS FALL IN MARKET AND ACCORDINGLY, ASSES SEE HAS MADE PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT. IT IS RELEVANT TO STATE THAT AS PER RES ERVE BANK OF INDIAS DIRECTION, ASSESSEE-COMPANY HAS TO MAKE PROVISION FOR DIMINUTION IN VALUE OF IT S INVESTMENT. IT IS ALSO A FACT THAT ASSESSEE- COMPANY HAS TO SHOW THE SAID SHARES EVEN IF IT IS H ELD AS TRADING ASSET UNDER THE HEAD INVESTMENT. WE OBSERVE THAT THE SAID ISSUE WAS CONSIDERED BY TH E TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 (SUPRA) AND THE TRIBUNAL DI RECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DIMINUTION IN VALUE OF INVESTMENT. LD. DEPARTMEN TAL REPRESENTATIVE HAS NOT BEEN ABLE TO DISTINGUISH THE FACTS OF THAT CASE VIS--VIS IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIEW OF ITA NO. 1436/KOL/2009 8 ABOVE, THAT ISSUE IS COVERED BY EARLIER ORDER OF TH E TRIBUNAL, WE REVERSE THE ORDERS OF THE AUTHORITIE S BELOW BY ALLOWING GROUND NO.4 OF THE APPEAL TAKEN B Y ASSESSEE. 19. IN RESPECT OF GROUND NO.5 OF MODIFIED GROUND OF APPEAL, ASSESSING OFFICER HAS STATED THAT THERE WAS A RECEIPT ON ACCOUNT OF RIGHTS RENUNCIAT ION AGGREGATING RS.17,41,145/- AND THE SAME HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE FILED APPEAL BEFORE THE 1 ST APPELLATE AUTHORITY AND CONTENDED THAT RIGHT TO SUB SCRIBE FOR SHARES IS A PROPERTY AND THEREFORE, IT I S CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) O F INCOME TAX ACT. HENCE, THE AMOUNT RECEIVED ON RENOUNCING RIGHTS ENTITLEMENT SHOULD BE TAXED UN DER THE HEAD CAPITAL GAIN. IT WAS ALSO CONTENDED THAT THE SAID AMOUNT ON ACCOUNT OF RIGHT OF RENUNCI ATION IS DEEMED TO BE RECEIVED IN THE HANDS OF ASSESSEE IN DIFFERENT PREVIOUS YEARS AND HENCE, THE SAID AMOUNT COULD NOT BE TAXED AS INCOME FOR ASSESSMENT YEAR UNDER CONSIDERATION. 20. LD. CIT(A) HAS STATED THAT ASSESSING OFFICER HA S NOT DISCUSSED ANYTHING WHILE MAKING THE SAID ADDITION OF RS.17,41,145/-. HE HAS STATED THAT ASSESSEE PRODUCED DETAILS OF RIGHT RENUNCIATION INCOME AND HAS STATED THAT THERE WAS INCOME OF RS.1 ,99,375/- FROM ARAVIND MILLS AND RS.4,15,600/- FROM GARDEN SILK MILLS LTD. IN FINANCIAL YEAR 1992- 93, AND INCOME OF RS.11,26,170/- FROM NAHAR SPINNING MILLS FOR ASSESSMENT YEAR 1994-95 (IT SHOU LD BE FINANCIAL YEAR 1994-95 AS PER WRITTEN SUBMISSION FILED BY ASSESSEE). LD. CIT(A) HAS STATE D THAT ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO CONFIRM THIS. HE HAS FURTHER STATED THAT THE CONTEN TION OF THE ASSESSEE THAT IT SHOULD BE TREATED AS CAPITAL GAINS DOES NOT DESERVE ANY MERIT AND HAS HE LD THAT INCOME EARNED WAS IN THE COURSE OF BUSINESS. HOWEVER, LD. CIT(A) HAS DIRECTED THE ASSE SSING OFFICER TO VERIFY THE DETAILS OF THIS INCOME FURNISHED BY ASSESSEE AND MAY BE CHARGED TO TAX IN THE RELEVANT ASSESSMENT YEARS AS BUSINESS INCOME. HENCE, ASSESSEE IS IN FURTHER APPE AL BEFORE THE TRIBUNAL. 21. LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE INCOME AROSE ON ACCOUNT OF RIGHT OF RENUNCIATION AND IT IS CAPITAL INCOME. LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT ASSESSEE DID NOT HAVE THE DETAILS IN RESPECT OF SHARES IN RESPECT OF WHICH RIGHT TO RENUNCIATION WAS EXERCISED, AS THE SAID SH ARES WERE IN THE CUSTODY OF THE CUSTODIAN APPOINTED BY THE SPECIAL COURT. HE SUBMITTED THAT T HE SAID DETAILS HAVE NOW BEEN RECEIVED FROM THE CUSTODIAN AFTER THE JUDGMENT GIVEN BY THE SPECIAL C OURT ON 01.11.2002. HE FURTHER SUBMITTED THAT THE SAID SHARES WERE CONNECTED WITH SCAM MATTER. HE SUBMITTED THAT IF THE ISSUE IS RESTORED TO ASSESSING OFFICER, ASSESSEE WILL FURNISH REQUISITE DETAILS, SINCE RECEIVED FROM THE CUSTODIAN AND WILL ITA NO. 1436/KOL/2009 9 SATISFY THAT THE SAID INCOME AGGREGATING RS.17,41,1 45/- IS THE INCOME TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN AND NOT AS BUSINESS INCOME. HE SUBMITT ED THAT THE SAID SHARES IN RESPECT OF WHICH RENUNCIATION RIGHTS WERE EXERCISED WERE THE CAPITAL ASSET OF ASSESSEE. 22. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO ASSESSING OFFICER TO CONSIDER IT AFRESH IN THE L IGHT OF THE REQUISITE DOCUMENTS THAT MAY BE FURNISHED BY ASSESSEE. 23. CONSIDERING THE SUBMISSIONS OF LD. REPRESENTATI VES OF THE PARTIES AND THE FACT THAT ASSESSEE COULD NOT FURNISH REQUISITE DETAILS AT THE TIME OF HEARING BEFORE THE AUTHORITIES BELOW DUE TO REASONS BEYOND HIS CONTROL AS THE SAID DETAILS WERE TO BE R ECEIVED BY ASSESSEE FROM THE CUSTODIAN WHO WAS APPOINTED BY THE SPECIAL COURT AND THE FACT THAT TH E SAID DETAILS HAVE SINCE BEEN RECEIVED BY ASSESSEE, WE IN THE INTEREST OF JUSTICE MODIFY THE ORDER OF LD. CIT(A) WITH THE DIRECTION THAT ASSESSING OFFICER WILL CONSIDER THE ISSUE DENOVO ON THE BASIS OF THE DETAILS AS MAY BE FURNISHED BY ASSESSEE AND DECIDE ON THAT BASIS AS TO WHETHER THE SAID AMOUNT AGGREGATING RS.17,41,145/- IS TO BE TAXED UNDER THE HEAD BUSINESS INCOME OR UNDER THE H EAD CAPITAL GAIN AFTER GIVING DUE OPPORTUNITY OF HEARING TO ASSESSEE. HE WILL ALSO CONSIDER THE RELE VANT ASSESSMENT YEAR IN WHICH THE SAID INCOME IS TO BE CHARGED TO TAX ACCORDINGLY. HENCE, GROUND NO. 5 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 24. IN RESPECT OF GROUND NO.6 OF THE APPEAL, ASSESS ING OFFICER HAS OBSERVED IN PARA 5.4 AS UNDER:- IT HAS ALSO ENCLOSED DETAILS OF DIVIDEND RECEIVED FROM DOMESTIC COMPANIES FOR RS.9,58,930/-.IT IS INEXPLICABLE HOW THE INCOME OF RS.39,41,048/- INCLUDED IN OTHER INCOME SCHEDULE BECAME RS.9,58,930/- IN COM PUTATION. THEREFORE THE BALANCE OF RS.29,72,118/- IS ADDED BACK TO BUSINESS PROFIT AS UNEXPLAINED INCOME OF THE ASSESSEE. ASSESSEE FILED APPEAL BEFORE THE 1 ST APPELLATE AUTHORITY. ON BEHALF OF ASSESSEE, IT WAS CONTENDED THAT RS.29,72,117/- PERTAINS TO ASSESSMENT YEAR 2003-04. IT WAS ALSO CONTENDED THAT IT WAS ALSO OFFERED TO TAX ON THE BASIS OF DECLARATION/DISTRIBUTION. HOWEV ER, LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT NO RELEVANT DETAILS TO SUBSTANTIATE THE CLAIM HAVE BEEN FURNISHED BEFORE ASSESSING OFFICER AS WELL AS BEFORE HIM. THE RELEVANT PART OF PARA 8.3 OF LD. CIT(A) IS AS UNDER :- I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLAN T AND ALSO THE ASSESSMENT ORDER OF A.O. THE ARS SUBMISSIONS THAT RS.29,72,117/- BELONGS TO ITA NO. 1436/KOL/2009 10 EARLIER A.YEAR I.E. 2003-04. DIVIDEND INCOME CANNOT BE ACCEPTED WITHOUT FURNISHING EVIDENCES AND ALSO DETAILS OF THE SAME. IT IS NOT FOR THE AO TO ASSUME THAT RS.29,72,117/- IS INCLUDED IN THE DIVIDEND INC OME FOR A.Y. 2003-04. NO RELEVANT DETAILS TO SUBSTANTIATE THE CLAIM OF THE A PPELLANT HAVE BEEN FURNISHED BY AR BEFORE THE AO AND ALSO BEFORE ME. IT IS SIGNIFIC ANT TO NOTE THAT FOR THE A.Y. 2003-04 THE ASSESSEE CLAIMED THE DIVIDEND INCOME AS EXEMPT U/S. 10(33). THE BIFURCATION OF DIVIDEND INCOME FOR RS.73,19,242/- I S NOT FILED BEFORE ME. IF THE APPELLANT HAS ALREADY OFFERED TO TAX IN THE A.Y. 20 03-04, THEN WHY DID THE APPELLANT INCLUDE IN OTHER INCOME FOR AY 2004-05. THIS COULD NOT BE SATISFACTORILY EXPLAINED BY A.R. IN VIEW OF THIS TH E ADDITION MADE BY AO IS CONFIRMED AND GROUND OF APPEAL IS DISMISSED. HENCE, ASSESSEE IS FURTHER APPEAL BEFORE THE TRIBUN AL. 25. ON BEHALF OF ASSESSEE, IT WAS CONTENDED BY LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT IT REALISED DIVIDEND TO THE EXTENT OF RS.39,31 ,048/- IN FINANCIAL YEAR 2003-04 AND REFERRED PAGE 100 OF THE PAPER BOOK WHICH CONTAINS DETAILS OF DIV IDEND INCOME. HE SUBMITTED THAT ONLY DIVIDEND OF RS.9,58,930.50 PERTAINS TO ASSESSMENT YEAR UNDER CONSIDERATION AND REFERRED PAGE 99 OF THE PAPER BOOK. HE SUBMITTED THAT BALANCE AMOUNT OF DIVIDEND OF RS.29,72,118/- PERTAINS TO ASSESSMENT YEAR 2003-04 AND ASSESSEE OFFERED THE SAME FOR TAXATION IN THE SAID ASSESSMENT YEAR ON THE BASIS OF DECLARATION OF DIVIDEND. HE SUBMITTED THAT IN BOTH THE ASSESSMENT YEARS VIZ. ASSESSMENT YEARS 2003- 04 & 2004-05, DIVIDEND WAS TAKEN ON ACCRUAL BASIS. HE SUBMITTED THAT THE SAID DIVIDEND WAS IN RESPECT OF SHARES PLEDGED BY V.B. DESAI, SHARE BROK ER WHICH WERE IN THE CUSTODY OF THE CUSTODIAN AND REQUISITE DETAILS WERE NOT AVAILABLE TILL ASSES SMENT YEAR 2003-04. HE SUBMITTED THAT ASSESSEE DID NOT HAVE THE DETAILS OF DIVIDEND RECEIVED AND ACCOR DINGLY, THE SAID DIVIDEND OF RS.29,72,118/- WAS OFFERED FOR TAXATION IN TWO ASSESSMENT YEARS. HE SU BMITTED THAT IF THE ISSUE IS RESTORED TO ASSESSING OFFICER, ASSESSEE WILL FURNISH REQUISITE DETAILS TH AT THE SAID AMOUNT OF RS.29,72,118/- HAD ALREADY BEEN TAXED IN ASSESSMENT YEAR 2003-04, AS IN THE FI NANCIAL YEAR 2002-03 DIVIDEND INCOME WAS NOT EXEMPTED U/S. 10(34) OF INCOME TAX ACT. 26. LD. DEPARTMENTAL REPRESENTATIVE DID NOT DISPUTE THE ABOVE CONTENTION OF ASSESSEE, SAVE AND EXCEPT, RELYING ON THE ORDERS OF THE AUTHORITIES BE LOW. 27. CONSIDERING THE FACTS OF THE CASE AND ON PERUSA L OF DETAILS AT PAGES 99 & 100 OF THE PAPER BOOK IN RESPECT OF DIVIDEND INCOME AND THE FACT THA T SHARES WERE UNDER THE CUSTODY OF THE CUSTODIAN APPOINTED BY THE SPECIAL COURT, WE IN THE INTEREST OF JUSTICE, RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION THAT HE WILL EXA MINE ON THE BASIS OF THE DETAILS TO BE FURNISHED BY ASSESSEE AS TO WHETHER THE SAID AMOUNT OF RS.29,72, 118/- HAD ALREADY BEEN ASSESSED TO TAX IN THE ITA NO. 1436/KOL/2009 11 PRECEDING ASSESSMENT YEAR 2003-04 AND IF ASSESSEE E STABLISHES THE SAME TO THE SATISFACTION OF ASSESSING OFFICER, THE SAID AMOUNT WILL BE DELETED IN ASSESSMENT YEAR UNDER CONSIDERATION. HENCE GROUND NO.6 OF THE APPEAL IS ALSO ALLOWED FOR STATI STICAL PURPOSES. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART. 0 1 2# 3 04 5 ORDER PRONOUNCED IN THE OPEN COURT ON 10.06 .2011. SD/- SD/- [ , ] [ . . , ] [ AKBER BASHA ] [ B. R. MITTAL ] ACCOUNTANT MEMBER JUDICIAL MEMBER 5 / DATED : 10-06-2011. PRONOUNCED BY SD/- SD/- [S.V. MEHROTA/A.M.] [B.R. MIT TAL/J.M.] 6 -7 87&9 - COPY OF THE ORDER FORWARDED TO: 1. % /APPLICANT- ALL BANK FINANCE LIMITED, 15, MAHARAN A PRATAP SARANI, (FORMER INDIA EXCHANGE PLA CE), 4 TH FLOOR, KOLKATA-700 001. 2 -.*+ / RESPONDENT : ASSTT. COMMISSIONER OF INCOME TAX, C IRCLE-6, AAYAKAR BHAWAN, P-7, CHO WRINGHEE SQUARE, KOLKATA-700 069. 3. # / CIT 4. # ( )/ CIT(A) 5. %:3 -# / DR, KOLKATA BENCHES, KOLKATA [ .7 - / TRUE COPY] #2 / BY ORDER ; / !< /DEPUTY/ASSTT. REGISTRAR . [KKC %=> #?< @% /SR.PS]