SHRI. ASHOK SHANKAR CHITNIS, Mumbai V. ITO 21(1)(2), Mumbai

ITA 1492/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7961 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 12-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Assessee Lawyers: UMA MAHADEOKAR
• Keywords: Cost of acquisition
• Section: 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1492/M/2019 ASSESSMENT YEAR: 2014-15 SHRI ASHOK SHANKAR CHITNIS, D-5, MANOJ SOCTY, SHANKAR GHANEKAR RD., PRABHADEVI, MUMBAI - 400025 PAN: ACUPC0470A VS. ITO 21(1)(2), PIRAMAL CHAMBERS, MUMBAI - 400048 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : MS. UMA MAHADEOKAR, A.R. REVENUE BY : MS. SMITA VERMA, D.R. DATE OF HEARING : 29.06.2021 DATE OF PRONOUNCEMENT : 06.08.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 31.12.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THESE FACTS AND UNDER THESE CIRCUMSTANCES, T HE LEARNED CIT (A) ERRED IN CONFIRMING THE SHORT TERM CAPITAL GAIN (STCG) COMPU TED BY THE AO. HE OUGHT TO HAVE APPRECIATED THAT THE REVISED STCG STATEMENT FI LED BEFORE HIM BY YOUR APPELLANT GIVES THE CORRECT STCG AS PER THE PROVISI ONS OF INCOME TAX ACT, 1961 AND SHOULD BE ACCEPTED FOR CALCULATING INCOME TAX ON ST CG. 2. ON THESE FACTS AND UNDER THESE CIRCUMSTANCES, TH E LEARNED CIT (A) ERRED IN CONFIRMING THE STCG WITHOUT APPRECIATING THE FACT T HAT D'MAT STATEMENT IS MERELY A RECORD OF PHYSICAL QUANTITY OF SHARES OWNED BY YOUR APPELLANT AND CANNOT BE CONSIDERED FOR CALCULATION OF STCG UNDER THE INCOME TAX ACT ,1961. HE OUGHT TO ITA NO.1492/M/2019 SHRI ASHOK SHANKAR CHITNIS 2 HAVE APPRECIATED THAT FIFO METHOD IS THE ACCEPTED M ETHOD FOR VALUING COST OF ACQUISITION OF THE SHARES FOR THE CALCULATION OF ST CG . 3. ON THESE FACTS AND UNDER THESE CIRCUMSTANCES , T HE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION BY LEARNED AO OF RS 23,44,2 177- IN ADDITION TO THE STCG OF RS 2,31,5157- ALREADY OFFERED FOR TAX BY THE APPELL ANT. 4. WITHOUT PREJUDICE TO THE ABOVE , IT IS HUMBLY SU BMITTED THAT ON THESE FACTS AND UNDER THESE CIRCUMSTANCES , THE CASE MAY BE REMANDE D BACK FOR CONSIDERING THE CALCULATION OF STCG UNDER INCOME TAX ACT 1961 5. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER , DELE TE, AND OR ALTER ALL OR ANY OF THE ABOVE GROUNDS. 3. THE ONLY EFFECTIVE ISSUE RAISED BY THE ASSESSEE IN THE VARIOUS GROUNDS OF APPEAL IS AGAINST THE ORDER OF L D. CIT(A) UPHOLDING THE ORDER OF AO CONFIRMING THE ADDITION O F SHORT TERM CAPITAL GAIN OF RS.23,44,217/- AS MADE BY THE AO IN RESPECT OF L&T SHARES BY FOLLOWING THE LIFO METHOD FOR CALCU LATING THE SHORT TERM CAPITAL GAIN. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 27.10.2015 DECLARING TOTAL INCOME OF RS.6 ,01,080/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED F OR SCRUTINY AND STATUTORY NOTICES WERE DULY ISSUED AND SERVED U PON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE AO ASKED THE ASSESSEE TO SUBMIT THE COMPUTATION OF INC OME ALONG WITH DEMAT ACCOUNT IN RESPECT OF SHARE TRANSACTIONS WHICH WERE DULY FURNISHED BY THE ASSESSEE BEFORE THE AO. AFT ER EXAMINING THE INFORMATION FURNISHED BY THE ASSESSE, THE AO CA ME TO CONCLUSION THAT ASSESSEE HAS NOT OFFERED TO TAX THE SPECULATION INCOME AND SHORT TERM CAPITAL GAIN ON MANY SCRIPTS IN THE RETURN OF INCOME AND ACCORDINGLY ISSUED A SHOW CAUS E NOTICE DATED 07.12.2016 TO EXPLAIN THE SAME WHICH WAS REPL IED BY THE ASSESSEE. THE AO AFTER CONSIDERING THE REPLY OF TH E ASSESSEE ADDED TO THE INCOME OF THE ASSESSE RS.78,934/- ON A CCOUNT OF ITA NO.1492/M/2019 SHRI ASHOK SHANKAR CHITNIS 3 SPECULATION INCOME AND RS.23,44,217/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN ON SALE OF SHARES ON THE GROUND T HAT ASSESSEE HIMSELF ACCEPTED DURING THE ASSESSMENT PROCEEDINGS THAT THIS HAS HAPPENED DUE TO MISTAKE OF THE ACCOUNTANT. 5. IN THE APPELLATE PROCEEDINGS THE ASSESSE, CHALLE NGED ONLY THE ADDITION OF RS.23,44,217/- WHICH WAS DISMISSED BY OBSERVING THAT THE ASSESSEE HAS HIMSELF ADMITTED T HAT THIS SHORT TERM CAPITAL GAIN COULD NOT BE OFFERED TO TAX DUE T O MISTAKE OF THE ACCOUNTANT OF THE ASSESSE. WHILE DISMISSING TH E APPEAL THE LD. CIT(A) BRUSHED ASIDE THE CONTENTIONS OF THE ASS ESSEE QUA THE FACT THAT THE COMPUTATION OF CAPITAL GAIN ON THE SA LE OF SHARE SHOULD BE COMPUTED BY TAKING THE COST OF SHARES ON THE BASIS OF FIRST COME FIRST OUT. THE LD AR SUBMITTED BEFORE T HE LD CIT(A) THAT THERE WAS AN ERROR ON THE PART OF ICICI BANK IN REPORTING THE FACTS WITH WHICH THE ASSESSEE MAINTAINED HIS DE MAT ACCOUNT. THE ASSESSEE ARGUED BEFORE THE LD. CIT(A) THAT ASSESSEE WAS HOLDING 8450 SHARES AND LATER ON RECE IVED BONUS SHARE OF 4225 IN RESPECT OF L & T LTD . ACCORDING TO THE COUNSEL OF THE ASSESSE THE SALE OF 3200 SHARES WAS TO BE SHOWN FROM THE SHARE HELD ON THE PRINCIPLE OF FIRST COME FIRST OUT AND THEREFORE THE COST OF ACQUISITION SHOULD HAVE BEEN CONSIDERED OUT OF 8450 EQUITY SHARES AND NOT OUT OF BONUS SHAR ES. HOWEVER, THE LD. CIT(A) DISMISSED THE APPEAL BY CIT ING THE REASON THAT ASSESSEE HIMSELF ACCEPTED BEFORE THE AO THAT THIS HAS HAPPENED DUE TO AN OVERSIGHT OF AN ACCOUNTANT A ND THUS DISMISSED THE APPEAL. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAD A DEMAT ACCOU NT WITH ITA NO.1492/M/2019 SHRI ASHOK SHANKAR CHITNIS 4 ICICI BANK IN WHICH THE ASSESSEE HELD 8450 SHARES O F L&T PRIOR TO 12.06.2013. THEREAFTER, ASSESSEE WAS ISSUED 422 5 BONUS SHARES ON 17.07.2013. THE ASSESSEE ALSO SOLD 5250 SHARES UP TO 12.06.2013 AND FURTHER SOLD 3200 SHARES AFTER BO NUS SHARES WERE CREDITED IN THE DEMAT ACCOUNT. THEREFORE, ACC ORDING TO THE ASSESSEE THE CALCULATION OF SHORT TERM CAPITAL GAIN SHOULD BE MADE BY FOLLOWING FIFO METHOD AND THUS THE SHARES H ELD BY THE ASSESSEE PRIOR TO 17.07.2013 SHOULD BE CONSIDERED F OR COMPUTING SHORT TERM CAPITAL GAIN AND NOT THE BONU S SHARES. HOWEVER, THE ICICI BANK SECURITIES STATEMENT HAD A MISTAKE WHEREIN THE SALE OF SHARES WERE SHOWN OUT OF BONUS SHARES CONSIDERING THE COST AT NIL. THE ASSESSEE ALSO PRO DUCED CORRECT STATEMENT BEFORE LD CIT(A). HOWEVER, THE LD. CIT(A ) FAILED TO CONSIDER THE SAME AND CONFIRMED THE ORDER OF AO. S IMILARLY, THERE ARE SEVERAL OTHER MISTAKES WHICH WERE POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE BEFORE US. UNDER THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE CAPIT AL GAIN OF THE ASSESSEE SHOULD BE COMPUTED ON THE BASIS OF METHOD FOLLOWED BY THE ASSESSEE CONSISTENTLY WHICH IS STATED TO BE FIF O METHOD. WE NOTE THIS WAS THE CONTENTION OF THE ASSESSE BEFORE THE FIRST APPELLATE AUTHORITY. IN OUR OPINION, THE CAPITAL G AIN IS REQUIRED TO BE COMPUTED ON THE BASIS OF FIFO METHOD AND NOT ON LIFO METHOD AS HAS BEEN DONE BY THE AO. IN OTHER WORDS, THE CAPITAL GAIN ON SALE OF SHARES BY THE ASSESSEE IS TO BE COM PUTED BY TAKING THE COST OF SHARES ON LIFO BASIS MEANING THE REBY THAT BONUS SHARES ISSUED ON 17.07.2013 ARE NOT TO BE TAK EN FOLLOWING THE FIFO METHOD. IT IS FOR THIS REASON, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) AND ACC ORDINGLY WE RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH THE DIRECTION TO ITA NO.1492/M/2019 SHRI ASHOK SHANKAR CHITNIS 5 COMPUTE THE SHORT TERM CAPITAL GAIN ON FIFO METHOD AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING GIVEN T O THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.08.2021. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 06.08.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.