Asstt.CIT Cir.6, Pune, V. Span Ovearseas Ltd,

ITA 1523/PUN/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3170 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 22-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R D ONKAR
• Keywords: Opportunity of being heard; Earning of tax free income; Additional evidence; Speculation loss; Revised return; Futures and options; Rule 8D; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 1523/PN/07 (ASSTT. YEAR 2004-05) ACIT, CIRCLE-6, PUNE .... APPELLANT VS. SPAN OVERSEAS LTD. 16-B-1, SAROSH BHAVAN, PUNE-1 PAN NO. AABCS4214N . RESPONDENT C.O NO. 11/PN/09 (ASSTT. YEAR 2004-05) (ARISING OUT OF ITA NO. 1523/PN/07) SPAN OVERSEAS LTD. 16-B-1, SAROSH BHAVAN, PUNE-1 PAN NO. AABCS4214N .... APPELLANT VS. ACIT, CIRCLE-6, PUNE . RESPONDENT APPELLANT BY : SHRI PANKAJ GARG RESPONDENT BY : SHRI R.D. ONKAR ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-II, PUNE DATED 27-05-2009 FOR THE A.Y 2005-06 . GROUNDS RA ISED IN THE APPEAL ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT(APPEALS) IS CONTRARY T O LAW TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(APPEALS) GROSSLY ERRED IN DELET ING THE DISALLOWANCE OF RS. 2,66,989/- MADE BY THE ASSESSIN G OFFICER BY APPLYING THE PROVISIONS OF SECTION 14A, INSTEAD OF CONFIRMIN G THE SAID DISALLOWANCE. ITA NO. 1523/PN/07 & C.O NO. 11/PN/09 A.Y: 2004-05 PAGE 2 OF 4 3. THE LEARNED CIT(APPEALS) OUGHT TO HAVE CONSIDER ED THE DETAILED WORKING MADE BY THE ASSESSING OFFICER BEFORE ARRIVIN G AT THE PROPORTIONATE QUANTUM OF INTEREST CLAIMED ON THE BO RROWED FUNDS THAT WERE UTILIZED FOR THE PURPOSE OF EARNING THE EXEMPT INCOME. 4. THE LEARNED CIT(APPEALS) ERRED IN GIVING A FIN DING THAT INVESTMENTS IN TAX FREE BONDS ETC. HAD BEEN MADE FR OM SURPLUS FUNDS WHEN THE ASSESSEE HAD NOT IN ANY MANNER ESTABLISHED THE UTILIZATION OF THE INTEREST-BEARING FUNDS. 5. THE LEARNED CIT(APPEALS) ERRED IN ADMITTING THE ADDITIONAL EVIDENCE CONSISTING OF COPIES OF THE BANK STATEMENT OF EEFC ACCOUNT, THE CITIBANK A/C. AND A COPY OF THE LETTER FROM THE CEN TRAL FINANCIAL SECURITIES PVT. LTD., VIOLATION OF THE PROVISIONS OF RULE 46A( 3), WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSESSING OFFICER BEFORE SUCH AD MISSION. 6. THE LEARNED CIT(APPEALS) GROSSLY ERRED IN ALLOW ING THE CLAIM OF SPECULATION LOSSES AMOUNTING TO RS. 4,59,198/- MADE BY THE ASSESSEE SUBSEQUENT TO THE FILING THE RETURN OF INCOME, TREA TING THE CLAIM AS A MISTAKE APPARENT FROM THE RECORDS. 7. THE LEARNED CIT(APPEALS) OUGHT TO HAVE CONSIDER ED THE BINDING DECISION OF THE HONOURABLE SUPREME COURT OF INDIA I N THE CASE OF GOETZE INDIA LTD. VS. CIT (284 ITR 323) WHEREIN THE APEX C OURT HELD THAT THE PROPER PROCEDURE UNDER SUCH CIRCUMSTANCES (CITED IN GROUND 4) IS TO PREFER A CLAIM BY FILING A REVISED RETURN OF INCOME . 8. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGE D AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. AT THE VERY OUTSET LD. COUNSEL FOR THE ASSESSEE ST ATED THAT THE C.O IS NOT PRESSED. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRE SSED. 3. IN CONNECTION WITH THE MAIN APPEAL OF THE REVENU E BOTH THE PARTIES AGREED THAT GROUND 1 TO 5 RELATES TO THE DISALLOWANCE OF INTEREST EXPENDITURE INVOKING THE PROVISIONS OF SEC. 14A. PARTICULARLY, THE GROUND NO. 5 RELATES TO THE MANNER OF COMPLETING THE FIRST APPELLATE PROCEEDINGS BY ADMITTING SOME FACTS WITHOUT GIVING OPPORTUNITY TO A.O. BOTH THE PARTIES MENTIONED THAT THESE GROUNDS HAVE TO BE SET ASIDE TO THE FILES OF THE A.O FOR DECIDING THE ISSUE AFRESH CONSIDERING THE BOMBAY HIGH COURT JUDGEMENT IN THE CA SE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT ITXA NO. 626/10 AND WRIT PETITION NO. 758/10 4. ON HEARING BOTH THE SIDES THESE GROUNDS ARE REFERRED TO T HE FILES OF THE A.O FOR DECIDING THE ISSUE AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ALSO AFTER DECIDING THE ABOVE REFERRED JUDGEMENT OF BOM BAY HIGH COURT AND RULE 8D OF THE I.T. RULES 1962. ACCORDINGLY THESE GROUNDS ARE SET ASIDE . ITA NO. 1523/PN/07 & C.O NO. 11/PN/09 A.Y: 2004-05 PAGE 3 OF 4 4. GROUNDS 6 AND 7 RELATE TO THE MANNER IN WHICH THE ASSESSEE CLAIMED THE CARRY FORWARD OF THE SPECULATION LOSS BEFORE THE AO IN VIOLATION OF THE SUPREME COURT JUDGEMENT IN THE CASE OF GOETZE INDIA LTD. VS. CIT 284 ITR 323. IN THIS CASE, THE ASSESSEE MADE A CLAIM OF LOSS EARNED ON AC COUNT OF DERIVATIVES AS BUSINESS LOSSES. DURING THE ASSESSMENT PROCEEDINGS, T HE ASSESSEE REQUESTED TO THE A.O TO RECTIFY THE MISTAKE AND ALLOW THE SAME AS SPECULATION LOSS AND ALLOW THE BENEFIT OF CARRY FORWARD OF THE SAID LOSS IN ACCORD ANCE WITH PROVISIONS IN THE ACT. A.O DID NOT ENTERTAIN THE ASSESSEES REQUEST AN D DENIED THE BENEFITS AS ASSESSED DID NOT MAKE THE SAID CLAIM BY FILING THE REVISED RETURN INCOME IN COMPLIANCE OF THE ABOVE REFERRED SUPREME COURT JUDGMENT. HOWEVER, DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE RAISED THIS GROUND SEPARATELY AS EVIDENT FROM FORM NO. 35 AND THE SAME WAS ALLOWED BY THE CIT( A) IN FAVOUR OF THE ASSESSEE. AGGRIEVED WITH THE SAME, THE REVENUE IS BEF ORE US. 5. DURING THE PROCEEDINGS LD. AR FILED THE COPY OF TH E SPECIAL BENCH DECISION IN THE CASE OF SHREE CAPITAL SERVICES LTD., KOLKATA V S. ACIT, CIRCLE 5, KOLKATA 2009-TIOL-542-ITAT-KOL-SB AND THE ARGUMENTS OF THE A R IN THIS REGARD ARE AS UNDER:- 1. THE A.O HAS DENIED THE CARRY FORWARD OF LOSS FOR SE T OFF BY INCORRECTLY HOLDING THAT THE CLAIM FOR CARRY FORWARD WAS A FRESH CLAIM MADE BY THE ASSESSEE. THE LOSS ON DERIVATIVE TRANSACTIONS UNDER FUTURES AND OPTIONS SEGMENT RS. 4,59,198/- WAS SET OFF AGAINST PROFIT ON SALE OF SHARES RS. 93,07,798/-. THE NET FIGURE OF RS. 88,48,600/- WAS CREDITED TO TH E PROFIT & LOSS ACCOUNT AS PER THE BOOKS OF ACCOUNT. 2. AT THE TIME OF COMPUTATION OF TOTAL INCOME THE ASSESSEE INADVERTENTLY ADDED BACK THE LOSS TO THE NET PROFIT F IGURE AS PER THE PROFIT & LOSS ACCOUNT TAKEN AS THE STARTING POINT. THE SAID LOSS THEREFORE HAPPENED TO REMAIN CARRIED FORWARD FOR SET OFF IN THE SUC CEEDING YEAR/S IN CONSONANCE WITH THE PROVISIONS OF SECTION 73 AFTER IT WAS CONSIDERED TO BE SPECULATION LOSS. THIS MISTAKE WAS APPARENT FROM RECORD AND THEREFORE A REQUEST WAS MADE TO THE A.O TO ALLOW THE ASSESSEE TO RECTIFY THE SAID MISTAKE. 3. THE A.O HAS DENIED THE SAID LOSS TO BE CARRIED FO RWARD BY INCORRECTLY APPLYING THE DECISION OF THE HONOURABLE SU PREME COURT IN THE CASE OF GOETZE INDIA LIMITED 284 ITR 323. 6. WE FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL. IN OUR CONSIDERED OPINION, THE IN CORRECT PROCEDURE IF ANY IN MAKING THE SAID CLAIM BY THE ASSESSEE IS CURED BY VIRTUE OF CORRECT PROCEDURE ADOPTED BY THE AS SESSEE DURING THE FIRST ITA NO. 1523/PN/07 & C.O NO. 11/PN/09 A.Y: 2004-05 PAGE 4 OF 4 APPELLATE PROCEEDINGS, WHICH ARE THE APPELLATE PROCEE DINGS WHERE MAKING OF THE CLAIM BY WAY OF REVISED RETURN OF INCOME IS NOT THE REQ UIREMENT AS PER THE CITED JUDGMENT. ASSESSEE IS FREE TO MAKE NEW CLAIM SUBJECT ED TO CERTAIN CONDITIONS DURING THE APPELLATE PROCEEDINGS IE CIT(A) AND TRIBUNA L. THEREFORE, WE FIND GROUNDS RAISED BY THE REVENUE HAVE TO BE DISMISSED. A CCORDINGLY, GROUND NO. 7 AND 8 ARE DISMISSED . OTHER GROUNDS ARE GENERAL IN NATURE DID NOT CALL FOR SEPARATE ADJUDICATION. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALL OWED AND THE C.O IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED ON 24 TH NOVEMBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 24 TH NOVEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ACIT, CIRCLE-6, PUNE 2. ASSESSEE 3. CIT(A)-II, PUNE 4. CIT-III, PUNE 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE